Correlation Between State Trading and California Software

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

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

Diversification Opportunities for State Trading and California Software

0.34

Correlation Coefficient

State Trading  California Software

Weak diversification

The 3 months correlation between State and California is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding The State Trading and California Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Software and State Trading 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 The State Trading 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 State Trading i.e., State Trading and California Software go up and down completely randomly.

Pair Corralation between State Trading and California Software

Assuming the 90 days trading horizon The State Trading is expected to generate 1.26 times more return on investment than California Software. However, State Trading is 1.26 times more volatile than California Software. It trades about 0.02 of its potential returns per unit of risk. California Software is currently generating about -0.03 per unit of risk. If you would invest  16,221  in The State Trading on October 6, 2024 and sell it today you would earn a total of  32.00  from holding The State Trading or generate 0.2% return on investment over 90 days.

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

The State Trading  vs.  California Software

State Trading

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The State Trading are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, State Trading may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with State Trading and California Software

The main advantage of trading using opposite State Trading and California Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Trading 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 The State Trading 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.