Correlation Between INFORMATION SVC and AMADEUS IT

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

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

Diversification Opportunities for INFORMATION SVC and AMADEUS IT

0.48

Correlation Coefficient

INFORMATION SVC  AMADEUS IT

Very weak diversification

The 3 months correlation between INFORMATION and AMADEUS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding INFORMATION SVC GRP and AMADEUS IT GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMADEUS IT GRP and INFORMATION SVC 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 INFORMATION SVC GRP are associated (or correlated) with AMADEUS IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMADEUS IT GRP has no effect on the direction of INFORMATION SVC i.e., INFORMATION SVC and AMADEUS IT go up and down completely randomly.

Pair Corralation between INFORMATION SVC and AMADEUS IT

Assuming the 90 days horizon INFORMATION SVC GRP is expected to under-perform the AMADEUS IT. In addition to that, INFORMATION SVC is 1.25 times more volatile than AMADEUS IT GRP. It trades about -0.41 of its total potential returns per unit of risk. AMADEUS IT GRP is currently generating about -0.08 per unit of volatility. If you would invest  6,850  in AMADEUS IT GRP on October 5, 2024 and sell it today you would lose (100.00) from holding AMADEUS IT GRP or give up 1.46% of portfolio value over 90 days.

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

INFORMATION SVC GRP  vs.  AMADEUS IT GRP

INFORMATION SVC GRP

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days INFORMATION SVC GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, INFORMATION SVC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AMADEUS IT GRP

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days AMADEUS IT GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AMADEUS IT is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with INFORMATION SVC and AMADEUS IT

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

The idea behind INFORMATION SVC GRP and AMADEUS IT GRP 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.