Correlation Between Thomson Reuters and Cass Information

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

By analyzing existing cross correlation between Thomson Reuters Corp and Cass Information Systems, you can compare the effects of market volatilities on Thomson Reuters and Cass Information 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 Thomson Reuters with a short position of Cass Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thomson Reuters and Cass Information.

Diversification Opportunities for Thomson Reuters and Cass Information

-0.44

Correlation Coefficient

Thomson Reuters  Cass Information

Very good diversification

The 3 months correlation between Thomson and Cass is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Thomson Reuters Corp and Cass Information Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cass Information Systems and Thomson Reuters 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 Thomson Reuters Corp are associated (or correlated) with Cass Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cass Information Systems has no effect on the direction of Thomson Reuters i.e., Thomson Reuters and Cass Information go up and down completely randomly.

Pair Corralation between Thomson Reuters and Cass Information

Considering the 90-day investment horizon Thomson Reuters Corp is expected to generate 0.62 times more return on investment than Cass Information. However, Thomson Reuters Corp is 1.61 times less risky than Cass Information. It trades about 0.08 of its potential returns per unit of risk. Cass Information Systems is currently generating about 0.01 per unit of risk. If you would invest  10,887  in Thomson Reuters Corp on August 31, 2024 and sell it today you would earn a total of  5,372  from holding Thomson Reuters Corp or generate 49.34% return on investment over 90 days.

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

Thomson Reuters Corp  vs.  Cass Information Systems

Thomson Reuters Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thomson Reuters Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Thomson Reuters is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Cass Information Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Information Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cass Information may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Thomson Reuters and Cass Information

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

The idea behind Thomson Reuters Corp and Cass Information Systems 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.