Correlation Between Formula Systems and Kyndryl Holdings

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Can any of the company-specific risk be diversified away by investing in both Formula Systems and Kyndryl Holdings 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 Formula Systems and Kyndryl Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formula Systems 1985 and Kyndryl Holdings, you can compare the effects of market volatilities on Formula Systems and Kyndryl Holdings 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 Formula Systems with a short position of Kyndryl Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and Kyndryl Holdings.

Diversification Opportunities for Formula Systems and Kyndryl Holdings

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Formula and Kyndryl is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and Kyndryl Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyndryl Holdings and Formula Systems 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 Formula Systems 1985 are associated (or correlated) with Kyndryl Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyndryl Holdings has no effect on the direction of Formula Systems i.e., Formula Systems and Kyndryl Holdings go up and down completely randomly.

Pair Corralation between Formula Systems and Kyndryl Holdings

Assuming the 90 days horizon Formula Systems is expected to generate 2.11 times less return on investment than Kyndryl Holdings. In addition to that, Formula Systems is 1.02 times more volatile than Kyndryl Holdings. It trades about 0.03 of its total potential returns per unit of risk. Kyndryl Holdings is currently generating about 0.07 per unit of volatility. If you would invest  2,721  in Kyndryl Holdings on August 24, 2024 and sell it today you would earn a total of  528.00  from holding Kyndryl Holdings or generate 19.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.21%
ValuesDaily Returns

Formula Systems 1985  vs.  Kyndryl Holdings

 Performance 
       Timeline  
Formula Systems 1985 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Formula Systems may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Kyndryl Holdings 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Kyndryl Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Kyndryl Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Formula Systems and Kyndryl Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Formula Systems and Kyndryl Holdings

The main advantage of trading using opposite Formula Systems and Kyndryl Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formula Systems position performs unexpectedly, Kyndryl Holdings 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 Kyndryl Holdings will offset losses from the drop in Kyndryl Holdings' long position.
The idea behind Formula Systems 1985 and Kyndryl Holdings 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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