Correlation Between Tera Software and Compucom Software

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

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

Diversification Opportunities for Tera Software and Compucom Software

-0.51

Correlation Coefficient

Tera Software  Compucom Software

Excellent diversification

The 3 months correlation between Tera and Compucom is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Tera Software Limited and Compucom Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compucom Software and Tera Software 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 Tera Software Limited are associated (or correlated) with Compucom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compucom Software has no effect on the direction of Tera Software i.e., Tera Software and Compucom Software go up and down completely randomly.

Pair Corralation between Tera Software and Compucom Software

Assuming the 90 days trading horizon Tera Software Limited is expected to under-perform the Compucom Software. But the stock apears to be less risky and, when comparing its historical volatility, Tera Software Limited is 1.42 times less risky than Compucom Software. The stock trades about -0.71 of its potential returns per unit of risk. The Compucom Software Limited is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  2,220  in Compucom Software Limited on November 29, 2024 and sell it today you would lose (224.00) from holding Compucom Software Limited or give up 10.09% of portfolio value over 90 days.

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

Tera Software Limited  vs.  Compucom Software Limited

Tera Software Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tera Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Compucom Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compucom Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Tera Software and Compucom Software

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

The idea behind Tera Software Limited and Compucom Software Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.