Correlation Between Cass Information and DLH Holdings

Can any of the company-specific risk be diversified away by investing in both Cass Information and DLH 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 Cass Information and DLH Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cass Information Systems and DLH Holdings Corp, you can compare the effects of market volatilities on Cass Information and DLH 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 Cass Information with a short position of DLH Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cass Information and DLH Holdings.

Diversification Opportunities for Cass Information and DLH Holdings

0.23

Correlation Coefficient

Cass Information  DLH Holdings

Modest diversification

The 3 months correlation between Cass and DLH is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Cass Information Systems and DLH Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DLH Holdings Corp and Cass Information 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 Cass Information Systems are associated (or correlated) with DLH Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DLH Holdings Corp has no effect on the direction of Cass Information i.e., Cass Information and DLH Holdings go up and down completely randomly.

Pair Corralation between Cass Information and DLH Holdings

Given the investment horizon of 90 days Cass Information Systems is expected to generate 0.8 times more return on investment than DLH Holdings. However, Cass Information Systems is 1.25 times less risky than DLH Holdings. It trades about -0.15 of its potential returns per unit of risk. DLH Holdings Corp is currently generating about -0.3 per unit of risk. If you would invest  4,701  in Cass Information Systems on February 3, 2024 and sell it today you would lose (273.00) from holding Cass Information Systems or give up 5.81% of portfolio value over 90 days.

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

Cass Information Systems  vs.  DLH Holdings Corp

Cass Information Systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Information Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cass Information is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

DLH Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DLH Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cass Information and DLH Holdings

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

The idea behind Cass Information Systems and DLH Holdings Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.