Correlation Between USU Software and Traton SE

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

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

Diversification Opportunities for USU Software and Traton SE

0.29

Correlation Coefficient

USU Software  Traton SE

Modest diversification

The 3 months correlation between USU and Traton is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding USU Software AG and Traton SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traton SE and USU Software 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 USU Software AG are associated (or correlated) with Traton SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traton SE has no effect on the direction of USU Software i.e., USU Software and Traton SE go up and down completely randomly.

Pair Corralation between USU Software and Traton SE

Assuming the 90 days trading horizon USU Software AG is expected to generate 1.18 times more return on investment than Traton SE. However, USU Software is 1.18 times more volatile than Traton SE. It trades about 0.17 of its potential returns per unit of risk. Traton SE is currently generating about 0.02 per unit of risk. If you would invest  1,735  in USU Software AG on September 4, 2024 and sell it today you would earn a total of  475.00  from holding USU Software AG or generate 27.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

USU Software AG  vs.  Traton SE

USU Software AG

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USU Software AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, USU Software reported solid returns over the last few months and may actually be approaching a breakup point.

Traton SE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Traton SE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Traton SE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with USU Software and Traton SE

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

The idea behind USU Software AG and Traton SE 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.