Correlation Between Technos SA and Shopify

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

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

Diversification Opportunities for Technos SA and Shopify

-0.06

Correlation Coefficient

Technos SA  Shopify

Good diversification

The 3 months correlation between Technos and Shopify is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Technos SA and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify and Technos SA 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 Technos SA are associated (or correlated) with Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Technos SA i.e., Technos SA and Shopify go up and down completely randomly.

Pair Corralation between Technos SA and Shopify

Assuming the 90 days trading horizon Technos SA is expected to generate 3.95 times less return on investment than Shopify. But when comparing it to its historical volatility, Technos SA is 1.15 times less risky than Shopify. It trades about 0.06 of its potential returns per unit of risk. Shopify is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  407.00  in Shopify on October 8, 2024 and sell it today you would earn a total of  148.00  from holding Shopify or generate 36.36% return on investment over 90 days.

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

Technos SA  vs.  Shopify

Technos SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Technos SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Technos SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Shopify

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Shopify sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Technos SA and Shopify

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

The idea behind Technos SA and Shopify 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.