Correlation Between Information Services and Science Applications

Can any of the company-specific risk be diversified away by investing in both Information Services and Science Applications 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 Science Applications 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 Science Applications International, you can compare the effects of market volatilities on Information Services and Science Applications 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 Science Applications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Services and Science Applications.

Diversification Opportunities for Information Services and Science Applications

-0.72

Correlation Coefficient

Information Services  Science Applications

Pay attention - limited upside

The 3 months correlation between Information and Science is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Information Services Group and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications 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 Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Information Services i.e., Information Services and Science Applications go up and down completely randomly.

Pair Corralation between Information Services and Science Applications

Considering the 90-day investment horizon Information Services Group is expected to generate 1.41 times more return on investment than Science Applications. However, Information Services is 1.41 times more volatile than Science Applications International. It trades about -0.13 of its potential returns per unit of risk. Science Applications International is currently generating about -0.34 per unit of risk. If you would invest  353.00  in Information Services Group on September 26, 2024 and sell it today you would lose (18.00) from holding Information Services Group or give up 5.1% of portfolio value over 90 days.

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

Information Services Group  vs.  Science Applications Internati

Information Services

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Information Services and Science Applications

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

The idea behind Information Services Group and Science Applications International 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.