Correlation Between Grid Dynamics and Formula Systems

Can any of the company-specific risk be diversified away by investing in both Grid Dynamics and Formula Systems 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 Grid Dynamics and Formula Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grid Dynamics Holdings and Formula Systems 1985, you can compare the effects of market volatilities on Grid Dynamics and Formula Systems 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 Grid Dynamics with a short position of Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grid Dynamics and Formula Systems.

Diversification Opportunities for Grid Dynamics and Formula Systems

0.37

Correlation Coefficient

Grid Dynamics  Formula Systems

Weak diversification

The 3 months correlation between Grid and Formula is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Grid Dynamics Holdings and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 and Grid Dynamics 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 Grid Dynamics Holdings are associated (or correlated) with Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of Grid Dynamics i.e., Grid Dynamics and Formula Systems go up and down completely randomly.

Pair Corralation between Grid Dynamics and Formula Systems

Given the investment horizon of 90 days Grid Dynamics is expected to generate 1.37 times less return on investment than Formula Systems. In addition to that, Grid Dynamics is 1.06 times more volatile than Formula Systems 1985. It trades about 0.07 of its total potential returns per unit of risk. Formula Systems 1985 is currently generating about 0.1 per unit of volatility. If you would invest  8,525  in Formula Systems 1985 on November 29, 2024 and sell it today you would earn a total of  1,135  from holding Formula Systems 1985 or generate 13.31% return on investment over 90 days.

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

Grid Dynamics Holdings  vs.  Formula Systems 1985

Grid Dynamics Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Dynamics Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Grid Dynamics may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Formula Systems 1985

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 7 (%) 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.

Pair Trading with Grid Dynamics and Formula Systems

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

The idea behind Grid Dynamics Holdings and Formula Systems 1985 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.