Correlation Between Sure Tech and WhiteSmoke Software

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

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

Diversification Opportunities for Sure Tech and WhiteSmoke Software

0.1

Correlation Coefficient

Sure Tech  WhiteSmoke Software

Average diversification

The 3 months correlation between Sure and WhiteSmoke is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sure Tech Investments LP and WhiteSmoke Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WhiteSmoke Software and Sure Tech 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 Sure Tech Investments LP are associated (or correlated) with WhiteSmoke Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WhiteSmoke Software has no effect on the direction of Sure Tech i.e., Sure Tech and WhiteSmoke Software go up and down completely randomly.

Pair Corralation between Sure Tech and WhiteSmoke Software

Assuming the 90 days trading horizon Sure Tech Investments LP is expected to generate 0.64 times more return on investment than WhiteSmoke Software. However, Sure Tech Investments LP is 1.56 times less risky than WhiteSmoke Software. It trades about -0.05 of its potential returns per unit of risk. WhiteSmoke Software is currently generating about -0.18 per unit of risk. If you would invest  76,490  in Sure Tech Investments LP on December 22, 2024 and sell it today you would lose (5,520) from holding Sure Tech Investments LP or give up 7.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.08%
Values	Daily Returns

Sure Tech Investments LP  vs.  WhiteSmoke Software

Sure Tech Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sure Tech Investments LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

WhiteSmoke Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days WhiteSmoke Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sure Tech and WhiteSmoke Software

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

The idea behind Sure Tech Investments LP and WhiteSmoke 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.