Correlation Between Hackett and Formula Systems

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

Diversification Opportunities for Hackett and Formula Systems

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Hackett and Formula is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding The Hackett Group and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 and Hackett 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 The Hackett Group are associated (or correlated) with Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of Hackett i.e., Hackett and Formula Systems go up and down completely randomly.

Pair Corralation between Hackett and Formula Systems

Given the investment horizon of 90 days The Hackett Group is expected to generate 0.68 times more return on investment than Formula Systems. However, The Hackett Group is 1.47 times less risky than Formula Systems. It trades about 0.07 of its potential returns per unit of risk. Formula Systems 1985 is currently generating about 0.02 per unit of risk. If you would invest  2,157  in The Hackett Group on August 28, 2024 and sell it today you would earn a total of  963.00  from holding The Hackett Group or generate 44.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.72%
ValuesDaily Returns

The Hackett Group  vs.  Formula Systems 1985

 Performance 
       Timeline  
Hackett Group 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in The Hackett Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Hackett unveiled solid returns over the last few months and may actually be approaching a breakup point.
Formula Systems 1985 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Formula Systems may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Hackett and Formula Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hackett and Formula Systems

The main advantage of trading using opposite Hackett and Formula Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hackett position performs unexpectedly, Formula Systems 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 Formula Systems will offset losses from the drop in Formula Systems' long position.
The idea behind The Hackett Group and Formula Systems 1985 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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