Correlation Between CLPS and CGI
Can any of the company-specific risk be diversified away by investing in both CLPS and CGI 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 CLPS and CGI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CLPS Inc and CGI Inc, you can compare the effects of market volatilities on CLPS and CGI 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 CLPS with a short position of CGI. Check out your portfolio center. Please also check ongoing floating volatility patterns of CLPS and CGI.
Diversification Opportunities for CLPS and CGI
Poor diversification
The 3 months correlation between CLPS and CGI is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CLPS Inc and CGI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGI Inc and CLPS 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 CLPS Inc are associated (or correlated) with CGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGI Inc has no effect on the direction of CLPS i.e., CLPS and CGI go up and down completely randomly.
Pair Corralation between CLPS and CGI
Given the investment horizon of 90 days CLPS Inc is expected to under-perform the CGI. In addition to that, CLPS is 3.94 times more volatile than CGI Inc. It trades about -0.04 of its total potential returns per unit of risk. CGI Inc is currently generating about -0.03 per unit of volatility. If you would invest 11,382 in CGI Inc on August 26, 2024 and sell it today you would lose (222.00) from holding CGI Inc or give up 1.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CLPS Inc vs. CGI Inc
Performance |
| Timeline |
| CLPS Inc |
| CGI Inc |
CLPS and CGI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CLPS and CGI
The main advantage of trading using opposite CLPS and CGI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CLPS position performs unexpectedly, CGI 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 CGI will offset losses from the drop in CGI's long position.The idea behind CLPS Inc and CGI Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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