Correlation Between Profile Systems and Titan Cement

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

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

Diversification Opportunities for Profile Systems and Titan Cement

0.36

Correlation Coefficient

Profile Systems  Titan Cement

Weak diversification

The 3 months correlation between Profile and Titan is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Profile Systems Software and Titan Cement International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Cement Interna and Profile Systems 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 Profile Systems Software are associated (or correlated) with Titan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Cement Interna has no effect on the direction of Profile Systems i.e., Profile Systems and Titan Cement go up and down completely randomly.

Pair Corralation between Profile Systems and Titan Cement

Assuming the 90 days trading horizon Profile Systems Software is expected to under-perform the Titan Cement. But the stock apears to be less risky and, when comparing its historical volatility, Profile Systems Software is 1.53 times less risky than Titan Cement. The stock trades about -0.03 of its potential returns per unit of risk. The Titan Cement International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,000  in Titan Cement International on December 22, 2024 and sell it today you would earn a total of  135.00  from holding Titan Cement International or generate 3.38% return on investment over 90 days.

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

Profile Systems Software  vs.  Titan Cement International

Profile Systems Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days Profile Systems Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Profile Systems is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Titan Cement Interna

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Cement International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Titan Cement is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Profile Systems and Titan Cement

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

The idea behind Profile Systems Software and Titan Cement International 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 Transaction History module to view history of all your transactions and understand their impact on performance.