Correlation Between IDI Insurance and WhiteSmoke Software

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

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

Diversification Opportunities for IDI Insurance and WhiteSmoke Software

0.63

Correlation Coefficient

IDI Insurance  WhiteSmoke Software

Poor diversification

The 3 months correlation between IDI and WhiteSmoke is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding IDI Insurance and WhiteSmoke Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WhiteSmoke Software and IDI Insurance 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 IDI Insurance are associated (or correlated) with WhiteSmoke Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WhiteSmoke Software has no effect on the direction of IDI Insurance i.e., IDI Insurance and WhiteSmoke Software go up and down completely randomly.

Pair Corralation between IDI Insurance and WhiteSmoke Software

Assuming the 90 days trading horizon IDI Insurance is expected to generate 10.33 times less return on investment than WhiteSmoke Software. But when comparing it to its historical volatility, IDI Insurance is 14.52 times less risky than WhiteSmoke Software. It trades about 0.13 of its potential returns per unit of risk. WhiteSmoke Software is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,020  in WhiteSmoke Software on October 26, 2024 and sell it today you would earn a total of  39,980  from holding WhiteSmoke Software or generate 994.53% return on investment over 90 days.

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

IDI Insurance  vs.  WhiteSmoke Software

IDI Insurance

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IDI Insurance are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IDI Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

WhiteSmoke Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WhiteSmoke Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WhiteSmoke Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IDI Insurance and WhiteSmoke Software

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

The idea behind IDI Insurance and WhiteSmoke Software 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.