Correlation Between Information Services and Data Storage

Can any of the company-specific risk be diversified away by investing in both Information Services and Data Storage 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 Information Services and Data Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Information Services Group and Data Storage Corp, you can compare the effects of market volatilities on Information Services and Data Storage 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 Information Services with a short position of Data Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Services and Data Storage.

Diversification Opportunities for Information Services and Data Storage

-0.35

Correlation Coefficient

Information Services  Data Storage

Very good diversification

The 3 months correlation between Information and Data is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Information Services Group and Data Storage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Storage Corp and Information Services 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 Information Services Group are associated (or correlated) with Data Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Storage Corp has no effect on the direction of Information Services i.e., Information Services and Data Storage go up and down completely randomly.

Pair Corralation between Information Services and Data Storage

Considering the 90-day investment horizon Information Services Group is expected to generate 0.67 times more return on investment than Data Storage. However, Information Services Group is 1.49 times less risky than Data Storage. It trades about 0.14 of its potential returns per unit of risk. Data Storage Corp is currently generating about -0.06 per unit of risk. If you would invest  330.00  in Information Services Group on December 29, 2024 and sell it today you would earn a total of  70.00  from holding Information Services Group or generate 21.21% return on investment over 90 days.

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

Information Services Group  vs.  Data Storage Corp

Information Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Data Storage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Storage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Information Services and Data Storage

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

The idea behind Information Services Group and Data Storage Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.