Correlation Between Informatica and Arax Holdings

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

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

Diversification Opportunities for Informatica and Arax Holdings

0.78

Correlation Coefficient

Informatica  Arax Holdings

Poor diversification

The 3 months correlation between Informatica and Arax is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Informatica and Arax Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arax Holdings Corp and Informatica 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 Informatica are associated (or correlated) with Arax Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arax Holdings Corp has no effect on the direction of Informatica i.e., Informatica and Arax Holdings go up and down completely randomly.

Pair Corralation between Informatica and Arax Holdings

Given the investment horizon of 90 days Informatica is expected to under-perform the Arax Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Informatica is 9.56 times less risky than Arax Holdings. The stock trades about -0.16 of its potential returns per unit of risk. The Arax Holdings Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Arax Holdings Corp on December 29, 2024 and sell it today you would lose (12.00) from holding Arax Holdings Corp or give up 54.55% of portfolio value over 90 days.

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

Informatica  vs.  Arax Holdings Corp

Informatica

Risk-Adjusted Performance

Very Weak

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

Arax Holdings Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arax Holdings Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Arax Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Informatica and Arax Holdings

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

The idea behind Informatica and Arax Holdings 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.