Correlation Between PSI Software and DAIRY FARM

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

Diversification Opportunities for PSI Software and DAIRY FARM

-0.63

Correlation Coefficient

PSI Software  DAIRY FARM

Excellent diversification

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

Pair Corralation between PSI Software and DAIRY FARM

Assuming the 90 days trading horizon PSI Software AG is expected to generate 0.62 times more return on investment than DAIRY FARM. However, PSI Software AG is 1.63 times less risky than DAIRY FARM. It trades about 0.02 of its potential returns per unit of risk. DAIRY FARM INTL is currently generating about 0.01 per unit of risk. If you would invest  2,110  in PSI Software AG on October 6, 2024 and sell it today you would earn a total of  10.00  from holding PSI Software AG or generate 0.47% 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.  DAIRY FARM INTL

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

DAIRY FARM INTL

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with PSI Software and DAIRY FARM

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

The idea behind PSI Software AG and DAIRY FARM INTL 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.