Correlation Between Formula Systems and Kyndryl Holdings

Can any of the company-specific risk be diversified away by investing in both Formula Systems and Kyndryl Holdings 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 Kyndryl Holdings 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 Kyndryl Holdings, you can compare the effects of market volatilities on Formula Systems and Kyndryl Holdings 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 Kyndryl Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and Kyndryl Holdings.

Diversification Opportunities for Formula Systems and Kyndryl Holdings

0.13

Correlation Coefficient

Formula Systems  Kyndryl Holdings

Average diversification

The 3 months correlation between Formula and Kyndryl is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and Kyndryl Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyndryl Holdings 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 Kyndryl Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyndryl Holdings has no effect on the direction of Formula Systems i.e., Formula Systems and Kyndryl Holdings go up and down completely randomly.

Pair Corralation between Formula Systems and Kyndryl Holdings

Assuming the 90 days horizon Formula Systems 1985 is expected to generate 0.84 times more return on investment than Kyndryl Holdings. However, Formula Systems 1985 is 1.2 times less risky than Kyndryl Holdings. It trades about 0.02 of its potential returns per unit of risk. Kyndryl Holdings is currently generating about -0.05 per unit of risk. If you would invest  8,900  in Formula Systems 1985 on December 29, 2024 and sell it today you would earn a total of  94.00  from holding Formula Systems 1985 or generate 1.06% return on investment over 90 days.

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

Formula Systems 1985  vs.  Kyndryl Holdings

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.

Kyndryl Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kyndryl Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Formula Systems and Kyndryl Holdings

The main advantage of trading using opposite Formula Systems and Kyndryl Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formula Systems position performs unexpectedly, Kyndryl Holdings 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 Kyndryl Holdings will offset losses from the drop in Kyndryl Holdings' long position.

The idea behind Formula Systems 1985 and Kyndryl Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.