Correlation Between FormPipe Software and I Tech

Can any of the company-specific risk be diversified away by investing in both FormPipe Software and I Tech 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 FormPipe Software and I Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FormPipe Software AB and I Tech, you can compare the effects of market volatilities on FormPipe Software and I Tech 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 FormPipe Software with a short position of I Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of FormPipe Software and I Tech.

Diversification Opportunities for FormPipe Software and I Tech

0.32

Correlation Coefficient

FormPipe Software  I Tech

Weak diversification

The 3 months correlation between FormPipe and ITECH is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding FormPipe Software AB and I Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Tech and FormPipe Software 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 FormPipe Software AB are associated (or correlated) with I Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Tech has no effect on the direction of FormPipe Software i.e., FormPipe Software and I Tech go up and down completely randomly.

Pair Corralation between FormPipe Software and I Tech

Assuming the 90 days trading horizon FormPipe Software is expected to generate 4.25 times less return on investment than I Tech. But when comparing it to its historical volatility, FormPipe Software AB is 1.31 times less risky than I Tech. It trades about 0.01 of its potential returns per unit of risk. I Tech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,740  in I Tech on September 3, 2024 and sell it today you would earn a total of  220.00  from holding I Tech or generate 4.64% return on investment over 90 days.

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

FormPipe Software AB  vs.  I Tech

FormPipe Software

Risk-Adjusted Performance

0 of 100

Very Weak

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

I Tech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in I Tech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, I Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FormPipe Software and I Tech

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

The idea behind FormPipe Software AB and I Tech 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.