Correlation Between M3 and Caduceus Software

Can any of the company-specific risk be diversified away by investing in both M3 and Caduceus 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 M3 and Caduceus Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between M3 Inc and Caduceus Software Systems, you can compare the effects of market volatilities on M3 and Caduceus 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 M3 with a short position of Caduceus Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 and Caduceus Software.

Diversification Opportunities for M3 and Caduceus Software

0.31

Correlation Coefficient

M3  Caduceus Software

Weak diversification

The 3 months correlation between M3 and Caduceus is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding M3 Inc and Caduceus Software Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caduceus Software Systems and M3 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 M3 Inc are associated (or correlated) with Caduceus Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caduceus Software Systems has no effect on the direction of M3 i.e., M3 and Caduceus Software go up and down completely randomly.

Pair Corralation between M3 and Caduceus Software

Assuming the 90 days horizon M3 is expected to generate 2.46 times less return on investment than Caduceus Software. But when comparing it to its historical volatility, M3 Inc is 5.6 times less risky than Caduceus Software. It trades about 0.16 of its potential returns per unit of risk. Caduceus Software Systems is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.55  in Caduceus Software Systems on December 28, 2024 and sell it today you would earn a total of  0.01  from holding Caduceus Software Systems or generate 1.82% return on investment over 90 days.

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

M3 Inc  vs.  Caduceus Software Systems

M3 Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, M3 showed solid returns over the last few months and may actually be approaching a breakup point.

Caduceus Software Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caduceus Software Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Caduceus Software exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with M3 and Caduceus Software

The main advantage of trading using opposite M3 and Caduceus Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 position performs unexpectedly, Caduceus 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 Caduceus Software will offset losses from the drop in Caduceus Software's long position.

The idea behind M3 Inc and Caduceus Software Systems 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.