Correlation Between Yellow Pages and COMPUTERSHARE

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

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

Diversification Opportunities for Yellow Pages and COMPUTERSHARE

0.97

Correlation Coefficient

Yellow Pages  COMPUTERSHARE

Almost no diversification

The 3 months correlation between Yellow and COMPUTERSHARE is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Yellow Pages Limited and COMPUTERSHARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPUTERSHARE and Yellow Pages 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 Yellow Pages Limited are associated (or correlated) with COMPUTERSHARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPUTERSHARE has no effect on the direction of Yellow Pages i.e., Yellow Pages and COMPUTERSHARE go up and down completely randomly.

Pair Corralation between Yellow Pages and COMPUTERSHARE

Assuming the 90 days horizon Yellow Pages is expected to generate 1.72 times less return on investment than COMPUTERSHARE. In addition to that, Yellow Pages is 1.51 times more volatile than COMPUTERSHARE. It trades about 0.07 of its total potential returns per unit of risk. COMPUTERSHARE is currently generating about 0.17 per unit of volatility. If you would invest  2,020  in COMPUTERSHARE on October 9, 2024 and sell it today you would earn a total of  80.00  from holding COMPUTERSHARE or generate 3.96% return on investment over 90 days.

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

Yellow Pages Limited  vs.  COMPUTERSHARE

Yellow Pages Limited

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yellow Pages Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Yellow Pages reported solid returns over the last few months and may actually be approaching a breakup point.

COMPUTERSHARE

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTERSHARE are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, COMPUTERSHARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yellow Pages and COMPUTERSHARE

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

The idea behind Yellow Pages Limited and COMPUTERSHARE 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.