Correlation Between Wayside Technology and Computershare

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

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

Diversification Opportunities for Wayside Technology and Computershare

0.93

Correlation Coefficient

Wayside Technology  Computershare

Almost no diversification

The 3 months correlation between Wayside and Computershare is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wayside Technology Group and Computershare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare Limited and Wayside Technology 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 Wayside Technology Group are associated (or correlated) with Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare Limited has no effect on the direction of Wayside Technology i.e., Wayside Technology and Computershare go up and down completely randomly.

Pair Corralation between Wayside Technology and Computershare

Assuming the 90 days horizon Wayside Technology Group is expected to generate 1.85 times more return on investment than Computershare. However, Wayside Technology is 1.85 times more volatile than Computershare Limited. It trades about 0.11 of its potential returns per unit of risk. Computershare Limited is currently generating about 0.04 per unit of risk. If you would invest  2,888  in Wayside Technology Group on September 18, 2024 and sell it today you would earn a total of  9,212  from holding Wayside Technology Group or generate 318.98% return on investment over 90 days.

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

Wayside Technology Group  vs.  Computershare Limited

Wayside Technology

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Computershare Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Computershare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wayside Technology and Computershare

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

The idea behind Wayside Technology Group and Computershare Limited 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.