Correlation Between PSI Software and Event Hospitality

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

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

Diversification Opportunities for PSI Software and Event Hospitality

-0.63

Correlation Coefficient

PSI Software  Event Hospitality

Excellent diversification

The 3 months correlation between PSI and Event is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding PSI Software AG and Event Hospitality and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Event Hospitality and PSI 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 PSI Software AG are associated (or correlated) with Event Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Event Hospitality has no effect on the direction of PSI Software i.e., PSI Software and Event Hospitality go up and down completely randomly.

Pair Corralation between PSI Software and Event Hospitality

Assuming the 90 days trading horizon PSI Software AG is expected to under-perform the Event Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, PSI Software AG is 1.25 times less risky than Event Hospitality. The stock trades about -0.03 of its potential returns per unit of risk. The Event Hospitality and is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  672.00  in Event Hospitality and on October 4, 2024 and sell it today you would earn a total of  3.00  from holding Event Hospitality and or generate 0.45% return on investment over 90 days.

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

PSI Software AG  vs.  Event Hospitality and

PSI Software AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSI Software AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PSI Software is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Event Hospitality

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Event Hospitality and are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Event Hospitality may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PSI Software and Event Hospitality

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

The idea behind PSI Software AG and Event Hospitality and 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.