Correlation Between Globant SA and Formula Systems

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

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

Diversification Opportunities for Globant SA and Formula Systems

-0.33

Correlation Coefficient

Globant SA  Formula Systems

Very good diversification

The 3 months correlation between Globant and Formula is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Globant SA 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 Globant SA 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 Globant SA 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 Globant SA i.e., Globant SA and Formula Systems go up and down completely randomly.

Pair Corralation between Globant SA and Formula Systems

Given the investment horizon of 90 days Globant SA is expected to under-perform the Formula Systems. In addition to that, Globant SA is 1.59 times more volatile than Formula Systems 1985. It trades about -0.14 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Globant SA  vs.  Formula Systems 1985

Globant SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globant SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Globant SA and Formula Systems

The main advantage of trading using opposite Globant SA and Formula Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globant SA 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 Globant SA 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.