Correlation Between USU Software and CIA ENGER

Can any of the company-specific risk be diversified away by investing in both USU Software and CIA ENGER 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 CIA ENGER 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 CIA ENGER ADR, you can compare the effects of market volatilities on USU Software and CIA ENGER 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 CIA ENGER. Check out your portfolio center. Please also check ongoing floating volatility patterns of USU Software and CIA ENGER.

Diversification Opportunities for USU Software and CIA ENGER

0.32

Correlation Coefficient

USU Software  CIA ENGER

Weak diversification

The 3 months correlation between USU and CIA is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding USU Software AG and CIA ENGER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIA ENGER ADR 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 CIA ENGER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIA ENGER ADR has no effect on the direction of USU Software i.e., USU Software and CIA ENGER go up and down completely randomly.

Pair Corralation between USU Software and CIA ENGER

Assuming the 90 days trading horizon USU Software AG is expected to generate 7.53 times more return on investment than CIA ENGER. However, USU Software is 7.53 times more volatile than CIA ENGER ADR. It trades about 0.07 of its potential returns per unit of risk. CIA ENGER ADR is currently generating about 0.13 per unit of risk. If you would invest  2,170  in USU Software AG on December 18, 2024 and sell it today you would earn a total of  120.00  from holding USU Software AG or generate 5.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

USU Software AG  vs.  CIA ENGER ADR

USU Software AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in USU Software AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, USU Software may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CIA ENGER ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CIA ENGER ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, CIA ENGER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with USU Software and CIA ENGER

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

The idea behind USU Software AG and CIA ENGER ADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.