Correlation Between Formula Systems and WNS Holdings

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

Diversification Opportunities for Formula Systems and WNS Holdings

-0.36

Correlation Coefficient

Formula Systems  WNS Holdings

Very good diversification

The 3 months correlation between Formula and WNS is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and WNS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WNS 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 WNS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WNS Holdings has no effect on the direction of Formula Systems i.e., Formula Systems and WNS Holdings go up and down completely randomly.

Pair Corralation between Formula Systems and WNS Holdings

Assuming the 90 days horizon Formula Systems is expected to generate 11.1 times less return on investment than WNS Holdings. In addition to that, Formula Systems is 1.32 times more volatile than WNS Holdings. It trades about 0.02 of its total potential returns per unit of risk. WNS Holdings is currently generating about 0.24 per unit of volatility. If you would invest  4,799  in WNS Holdings on September 1, 2024 and sell it today you would earn a total of  624.00  from holding WNS Holdings or generate 13.0% return on investment over 90 days.

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

Formula Systems 1985  vs.  WNS Holdings

Formula Systems 1985

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Formula Systems showed solid returns over the last few months and may actually be approaching a breakup point.

WNS Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WNS Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WNS Holdings is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Formula Systems and WNS Holdings

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

The idea behind Formula Systems 1985 and WNS 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.