Correlation Between Generic Engineering and Compucom Software

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

By analyzing existing cross correlation between Generic Engineering Construction and Compucom Software Limited, you can compare the effects of market volatilities on Generic Engineering and Compucom Software 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 Generic Engineering with a short position of Compucom Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generic Engineering and Compucom Software.

Diversification Opportunities for Generic Engineering and Compucom Software

0.52

Correlation Coefficient

Generic Engineering  Compucom Software

Very weak diversification

The 3 months correlation between Generic and Compucom is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Generic Engineering Constructi and Compucom Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compucom Software and Generic Engineering 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 Generic Engineering Construction are associated (or correlated) with Compucom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compucom Software has no effect on the direction of Generic Engineering i.e., Generic Engineering and Compucom Software go up and down completely randomly.

Pair Corralation between Generic Engineering and Compucom Software

Assuming the 90 days trading horizon Generic Engineering Construction is expected to under-perform the Compucom Software. In addition to that, Generic Engineering is 1.93 times more volatile than Compucom Software Limited. It trades about -0.27 of its total potential returns per unit of risk. Compucom Software Limited is currently generating about -0.28 per unit of volatility. If you would invest  2,968  in Compucom Software Limited on October 12, 2024 and sell it today you would lose (330.00) from holding Compucom Software Limited or give up 11.12% of portfolio value over 90 days.

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

Generic Engineering Constructi  vs.  Compucom Software Limited

Generic Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generic Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Compucom Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compucom Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Generic Engineering and Compucom Software

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

The idea behind Generic Engineering Construction and Compucom Software Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.