Correlation Between Sapiens International and Rand Capital

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

By analyzing existing cross correlation between Sapiens International and Rand Capital Corp, you can compare the effects of market volatilities on Sapiens International and Rand Capital 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 Sapiens International with a short position of Rand Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sapiens International and Rand Capital.

Diversification Opportunities for Sapiens International and Rand Capital

0.26

Correlation Coefficient

Sapiens International  Rand Capital

Modest diversification

The 3 months correlation between Sapiens and Rand is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sapiens International and Rand Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rand Capital Corp and Sapiens International 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 Sapiens International are associated (or correlated) with Rand Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rand Capital Corp has no effect on the direction of Sapiens International i.e., Sapiens International and Rand Capital go up and down completely randomly.

Pair Corralation between Sapiens International and Rand Capital

Given the investment horizon of 90 days Sapiens International is expected to generate 8.0 times less return on investment than Rand Capital. But when comparing it to its historical volatility, Sapiens International is 3.13 times less risky than Rand Capital. It trades about 0.02 of its potential returns per unit of risk. Rand Capital Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,793  in Rand Capital Corp on December 27, 2024 and sell it today you would earn a total of  107.00  from holding Rand Capital Corp or generate 5.97% return on investment over 90 days.

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

Sapiens International  vs.  Rand Capital Corp

Sapiens International

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sapiens International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sapiens International is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Rand Capital Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rand Capital Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rand Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sapiens International and Rand Capital

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

The idea behind Sapiens International and Rand Capital Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.