Correlation Between Pegasystems and KLDiscovery

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

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

Diversification Opportunities for Pegasystems and KLDiscovery

0.89

Correlation Coefficient

Pegasystems  KLDiscovery

Very poor diversification

The 3 months correlation between Pegasystems and KLDiscovery is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pegasystems and KLDiscovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLDiscovery and Pegasystems 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 Pegasystems are associated (or correlated) with KLDiscovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLDiscovery has no effect on the direction of Pegasystems i.e., Pegasystems and KLDiscovery go up and down completely randomly.

Pair Corralation between Pegasystems and KLDiscovery

Given the investment horizon of 90 days Pegasystems is expected to generate 2.54 times less return on investment than KLDiscovery. But when comparing it to its historical volatility, Pegasystems is 2.74 times less risky than KLDiscovery. It trades about 0.08 of its potential returns per unit of risk. KLDiscovery is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  215.00  in KLDiscovery on October 11, 2024 and sell it today you would earn a total of  85.00  from holding KLDiscovery or generate 39.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	25.66%
Values	Daily Returns

Pegasystems  vs.  KLDiscovery

Pegasystems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pegasystems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Pegasystems sustained solid returns over the last few months and may actually be approaching a breakup point.

KLDiscovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLDiscovery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, KLDiscovery is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Pegasystems and KLDiscovery

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

The idea behind Pegasystems and KLDiscovery 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.