Correlation Between Formula Systems and Computer Task

Can any of the company-specific risk be diversified away by investing in both Formula Systems and Computer Task 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 Computer Task 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 Computer Task Group, you can compare the effects of market volatilities on Formula Systems and Computer Task 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 Computer Task. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and Computer Task.

Diversification Opportunities for Formula Systems and Computer Task

0.77

Correlation Coefficient

Formula Systems  Computer Task

Poor diversification

The 3 months correlation between Formula and Computer is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and Computer Task Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Task Group 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 Computer Task. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Task Group has no effect on the direction of Formula Systems i.e., Formula Systems and Computer Task go up and down completely randomly.

Pair Corralation between Formula Systems and Computer Task

Assuming the 90 days horizon Formula Systems is expected to generate 5.25 times less return on investment than Computer Task. In addition to that, Formula Systems is 1.89 times more volatile than Computer Task Group. It trades about 0.02 of its total potential returns per unit of risk. Computer Task Group is currently generating about 0.23 per unit of volatility. If you would invest  735.00  in Computer Task Group on August 28, 2024 and sell it today you would earn a total of  33.00  from holding Computer Task Group or generate 4.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	3.97%
Values	Daily Returns

Formula Systems 1985  vs.  Computer Task Group

Formula Systems 1985

Risk-Adjusted Performance

3 of 100

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.

Computer Task Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Task Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Computer Task is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Formula Systems and Computer Task

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

The idea behind Formula Systems 1985 and Computer Task Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.