Correlation Between SOFTWARE MANSION and New Tech

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

By analyzing existing cross correlation between SOFTWARE MANSION SPOLKA and New Tech Venture, you can compare the effects of market volatilities on SOFTWARE MANSION and New Tech 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 SOFTWARE MANSION with a short position of New Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFTWARE MANSION and New Tech.

Diversification Opportunities for SOFTWARE MANSION and New Tech

-0.01

Correlation Coefficient

SOFTWARE MANSION  New Tech

Good diversification

The 3 months correlation between SOFTWARE and New is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding SOFTWARE MANSION SPOLKA and New Tech Venture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Tech Venture and SOFTWARE MANSION 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 SOFTWARE MANSION SPOLKA are associated (or correlated) with New Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Tech Venture has no effect on the direction of SOFTWARE MANSION i.e., SOFTWARE MANSION and New Tech go up and down completely randomly.

Pair Corralation between SOFTWARE MANSION and New Tech

Assuming the 90 days trading horizon SOFTWARE MANSION SPOLKA is expected to generate 0.64 times more return on investment than New Tech. However, SOFTWARE MANSION SPOLKA is 1.57 times less risky than New Tech. It trades about -0.05 of its potential returns per unit of risk. New Tech Venture is currently generating about -0.14 per unit of risk. If you would invest  3,380  in SOFTWARE MANSION SPOLKA on September 12, 2024 and sell it today you would lose (260.00) from holding SOFTWARE MANSION SPOLKA or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.41%
Values	Daily Returns

SOFTWARE MANSION SPOLKA  vs.  New Tech Venture

SOFTWARE MANSION SPOLKA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOFTWARE MANSION SPOLKA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

New Tech Venture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Tech Venture has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with SOFTWARE MANSION and New Tech

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

The idea behind SOFTWARE MANSION SPOLKA and New Tech Venture 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.