Correlation Between Leidos Holdings and Formula Systems

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

By analyzing existing cross correlation between Leidos Holdings and Formula Systems 1985, you can compare the effects of market volatilities on Leidos Holdings and Formula Systems 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 Leidos Holdings with a short position of Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leidos Holdings and Formula Systems.

Diversification Opportunities for Leidos Holdings and Formula Systems

-0.7

Correlation Coefficient

Leidos Holdings  Formula Systems

Excellent diversification

The 3 months correlation between Leidos and Formula is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Leidos Holdings and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 and Leidos Holdings 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 Leidos Holdings are associated (or correlated) with Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of Leidos Holdings i.e., Leidos Holdings and Formula Systems go up and down completely randomly.

Pair Corralation between Leidos Holdings and Formula Systems

Given the investment horizon of 90 days Leidos Holdings is expected to under-perform the Formula Systems. But the stock apears to be less risky and, when comparing its historical volatility, Leidos Holdings is 1.12 times less risky than Formula Systems. The stock trades about -0.04 of its potential returns per unit of risk. The Formula Systems 1985 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,900  in Formula Systems 1985 on December 29, 2024 and sell it today you would earn a total of  45.00  from holding Formula Systems 1985 or generate 0.51% return on investment over 90 days.

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

Leidos Holdings  vs.  Formula Systems 1985

Leidos Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leidos Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Leidos Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Formula Systems 1985

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Formula Systems is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Leidos Holdings and Formula Systems

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

The idea behind Leidos Holdings and Formula Systems 1985 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..