Correlation Between Core Main and Software Acquisition
Can any of the company-specific risk be diversified away by investing in both Core Main and Software Acquisition 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 Core Main and Software Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Core Main and Software Acquisition Group, you can compare the effects of market volatilities on Core Main and Software Acquisition 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 Core Main with a short position of Software Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Main and Software Acquisition.
Diversification Opportunities for Core Main and Software Acquisition
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Core and Software is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Core Main and Software Acquisition Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Acquisition and Core Main 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 Core Main are associated (or correlated) with Software Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Acquisition has no effect on the direction of Core Main i.e., Core Main and Software Acquisition go up and down completely randomly.
Pair Corralation between Core Main and Software Acquisition
Considering the 90-day investment horizon Core Main is expected to generate 5.82 times less return on investment than Software Acquisition. But when comparing it to its historical volatility, Core Main is 9.23 times less risky than Software Acquisition. It trades about 0.28 of its potential returns per unit of risk. Software Acquisition Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1.00 in Software Acquisition Group on September 13, 2024 and sell it today you would earn a total of 0.20 from holding Software Acquisition Group or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 81.82% |
| Values | Daily Returns |
Core Main vs. Software Acquisition Group
Performance |
| Timeline |
| Core Main |
| Software Acquisition |
Core Main and Software Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Core Main and Software Acquisition
The main advantage of trading using opposite Core Main and Software Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Main position performs unexpectedly, Software Acquisition 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 Software Acquisition will offset losses from the drop in Software Acquisition's long position.| Core Main vs. Distribution Solutions Group | Core Main vs. Global Industrial Co | Core Main vs. Applied Industrial Technologies | Core Main vs. BlueLinx Holdings |
| Software Acquisition vs. Luxfer Holdings PLC | Software Acquisition vs. Ecovyst | Software Acquisition vs. Codexis | Software Acquisition vs. Eastman Chemical |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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