Correlation Between Indra Sistemas and Appen

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

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

Diversification Opportunities for Indra Sistemas and Appen

-0.34

Correlation Coefficient

Indra Sistemas  Appen

Very good diversification

The 3 months correlation between Indra and Appen is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Indra Sistemas SA and Appen Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appen Limited and Indra Sistemas 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 Indra Sistemas SA are associated (or correlated) with Appen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appen Limited has no effect on the direction of Indra Sistemas i.e., Indra Sistemas and Appen go up and down completely randomly.

Pair Corralation between Indra Sistemas and Appen

Assuming the 90 days horizon Indra Sistemas SA is expected to under-perform the Appen. But the pink sheet apears to be less risky and, when comparing its historical volatility, Indra Sistemas SA is 10.54 times less risky than Appen. The pink sheet trades about -0.27 of its potential returns per unit of risk. The Appen Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  71.00  in Appen Limited on September 27, 2024 and sell it today you would lose (5.00) from holding Appen Limited or give up 7.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Indra Sistemas SA  vs.  Appen Limited

Indra Sistemas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indra Sistemas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Appen Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Appen Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Appen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Indra Sistemas and Appen

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

The idea behind Indra Sistemas SA and Appen Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.