Correlation Between INFORMATION SVC and PSI Software

Can any of the company-specific risk be diversified away by investing in both INFORMATION SVC and PSI 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 INFORMATION SVC and PSI Software 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 PSI Software AG, you can compare the effects of market volatilities on INFORMATION SVC and PSI 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 INFORMATION SVC with a short position of PSI Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of INFORMATION SVC and PSI Software.

Diversification Opportunities for INFORMATION SVC and PSI Software

-0.74

Correlation Coefficient

INFORMATION SVC  PSI Software

Pay attention - limited upside

The 3 months correlation between INFORMATION and PSI is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding INFORMATION SVC GRP and PSI Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSI Software AG 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 PSI Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSI Software AG has no effect on the direction of INFORMATION SVC i.e., INFORMATION SVC and PSI Software go up and down completely randomly.

Pair Corralation between INFORMATION SVC and PSI Software

Assuming the 90 days horizon INFORMATION SVC GRP is expected to under-perform the PSI Software. But the stock apears to be less risky and, when comparing its historical volatility, INFORMATION SVC GRP is 1.02 times less risky than PSI Software. The stock trades about -0.02 of its potential returns per unit of risk. The PSI Software AG is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,402  in PSI Software AG on October 4, 2024 and sell it today you would lose (292.00) from holding PSI Software AG or give up 12.16% of portfolio value over 90 days.

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

INFORMATION SVC GRP  vs.  PSI Software AG

INFORMATION SVC GRP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INFORMATION SVC reported solid returns over the last few months and may actually be approaching a breakup point.

PSI Software AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSI Software AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PSI Software is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with INFORMATION SVC and PSI Software

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

The idea behind INFORMATION SVC GRP and PSI Software AG 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.