Correlation Between WILLIS LEASE and CPU SOFTWAREHOUSE

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

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

Diversification Opportunities for WILLIS LEASE and CPU SOFTWAREHOUSE

-0.3

Correlation Coefficient

WILLIS LEASE  CPU SOFTWAREHOUSE

Very good diversification

The 3 months correlation between WILLIS and CPU is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and CPU SOFTWAREHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPU SOFTWAREHOUSE and WILLIS LEASE 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 WILLIS LEASE FIN are associated (or correlated) with CPU SOFTWAREHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPU SOFTWAREHOUSE has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and CPU SOFTWAREHOUSE go up and down completely randomly.

Pair Corralation between WILLIS LEASE and CPU SOFTWAREHOUSE

Assuming the 90 days horizon WILLIS LEASE FIN is expected to under-perform the CPU SOFTWAREHOUSE. But the stock apears to be less risky and, when comparing its historical volatility, WILLIS LEASE FIN is 2.36 times less risky than CPU SOFTWAREHOUSE. The stock trades about -0.07 of its potential returns per unit of risk. The CPU SOFTWAREHOUSE is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  89.00  in CPU SOFTWAREHOUSE on December 29, 2024 and sell it today you would earn a total of  19.00  from holding CPU SOFTWAREHOUSE or generate 21.35% return on investment over 90 days.

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

WILLIS LEASE FIN  vs.  CPU SOFTWAREHOUSE

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days WILLIS LEASE FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPU SOFTWAREHOUSE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, CPU SOFTWAREHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WILLIS LEASE and CPU SOFTWAREHOUSE

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

The idea behind WILLIS LEASE FIN and CPU SOFTWAREHOUSE 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.