Correlation Between Linde Plc and PSI Software

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

By analyzing existing cross correlation between Linde plc and PSI Software AG, you can compare the effects of market volatilities on Linde Plc and PSI Software 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 Linde Plc with a short position of PSI Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linde Plc and PSI Software.

Diversification Opportunities for Linde Plc and PSI Software

0.23

Correlation Coefficient

Linde Plc  PSI Software

Modest diversification

The 3 months correlation between Linde and PSI is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Linde plc and PSI Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSI Software AG and Linde Plc 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 Linde plc are associated (or correlated) with PSI Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSI Software AG has no effect on the direction of Linde Plc i.e., Linde Plc and PSI Software go up and down completely randomly.

Pair Corralation between Linde Plc and PSI Software

Assuming the 90 days horizon Linde plc is expected to generate 0.48 times more return on investment than PSI Software. However, Linde plc is 2.08 times less risky than PSI Software. It trades about 0.06 of its potential returns per unit of risk. PSI Software AG is currently generating about -0.02 per unit of risk. If you would invest  36,922  in Linde plc on September 13, 2024 and sell it today you would earn a total of  5,318  from holding Linde plc or generate 14.4% return on investment over 90 days.

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

Linde plc  vs.  PSI Software AG

Linde plc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Linde plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Linde Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

PSI Software AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSI Software AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Linde Plc and PSI Software

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

The idea behind Linde plc and PSI Software AG 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.