Correlation Between SIL Investments and California Software

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

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

Diversification Opportunities for SIL Investments and California Software

-0.68

Correlation Coefficient

SIL Investments  California Software

Excellent diversification

The 3 months correlation between SIL and California is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SIL Investments Limited and California Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Software and SIL Investments 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 SIL Investments Limited are associated (or correlated) with California Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Software has no effect on the direction of SIL Investments i.e., SIL Investments and California Software go up and down completely randomly.

Pair Corralation between SIL Investments and California Software

Assuming the 90 days trading horizon SIL Investments Limited is expected to under-perform the California Software. But the stock apears to be less risky and, when comparing its historical volatility, SIL Investments Limited is 1.18 times less risky than California Software. The stock trades about -0.18 of its potential returns per unit of risk. The California Software is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,815  in California Software on September 20, 2024 and sell it today you would lose (70.00) from holding California Software or give up 3.86% of portfolio value over 90 days.

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

SIL Investments Limited  vs.  California Software

SIL Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIL Investments Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, SIL Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

California Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with SIL Investments and California Software

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

The idea behind SIL Investments Limited and California Software 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.