Correlation Between Formula Systems and CLPS

Can any of the company-specific risk be diversified away by investing in both Formula Systems and CLPS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Formula Systems and CLPS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Formula Systems 1985 and CLPS Inc, you can compare the effects of market volatilities on Formula Systems and CLPS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Formula Systems with a short position of CLPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and CLPS.

Diversification Opportunities for Formula Systems and CLPS

0.48

Correlation Coefficient

Formula Systems  CLPS

Very weak diversification

The 3 months correlation between Formula and CLPS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and CLPS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLPS Inc and Formula Systems is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Formula Systems 1985 are associated (or correlated) with CLPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLPS Inc has no effect on the direction of Formula Systems i.e., Formula Systems and CLPS go up and down completely randomly.

Pair Corralation between Formula Systems and CLPS

Assuming the 90 days horizon Formula Systems is expected to generate 2.58 times less return on investment than CLPS. But when comparing it to its historical volatility, Formula Systems 1985 is 1.46 times less risky than CLPS. It trades about 0.02 of its potential returns per unit of risk. CLPS Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  115.00  in CLPS Inc on December 29, 2024 and sell it today you would earn a total of  4.00  from holding CLPS Inc or generate 3.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Formula Systems 1985  vs.  CLPS Inc

Formula Systems 1985

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Formula Systems is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

CLPS Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CLPS Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, CLPS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Formula Systems and CLPS

The main advantage of trading using opposite Formula Systems and CLPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formula Systems position performs unexpectedly, CLPS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CLPS will offset losses from the drop in CLPS's long position.

The idea behind Formula Systems 1985 and CLPS Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.