Correlation Between EPlus and PDF Solutions

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

By analyzing existing cross correlation between ePlus inc and PDF Solutions, you can compare the effects of market volatilities on EPlus and PDF Solutions 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 EPlus with a short position of PDF Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of EPlus and PDF Solutions.

Diversification Opportunities for EPlus and PDF Solutions

0.43

Correlation Coefficient

EPlus  PDF Solutions

Very weak diversification

The 3 months correlation between EPlus and PDF is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ePlus inc and PDF Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDF Solutions and EPlus 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 ePlus inc are associated (or correlated) with PDF Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDF Solutions has no effect on the direction of EPlus i.e., EPlus and PDF Solutions go up and down completely randomly.

Pair Corralation between EPlus and PDF Solutions

Given the investment horizon of 90 days EPlus is expected to generate 1.18 times less return on investment than PDF Solutions. But when comparing it to its historical volatility, ePlus inc is 1.15 times less risky than PDF Solutions. It trades about 0.04 of its potential returns per unit of risk. PDF Solutions is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,269  in PDF Solutions on February 14, 2024 and sell it today you would earn a total of  1,098  from holding PDF Solutions or generate 48.39% return on investment over 90 days.

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

ePlus inc  vs.  PDF Solutions

ePlus inc

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ePlus inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EPlus is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

PDF Solutions

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PDF Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, PDF Solutions is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EPlus and PDF Solutions

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

The idea behind ePlus inc and PDF Solutions 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.