Correlation Between Compucom Software and Elgi Rubber

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

By analyzing existing cross correlation between Compucom Software Limited and Elgi Rubber, you can compare the effects of market volatilities on Compucom Software and Elgi Rubber 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 Compucom Software with a short position of Elgi Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compucom Software and Elgi Rubber.

Diversification Opportunities for Compucom Software and Elgi Rubber

0.4

Correlation Coefficient

Compucom Software  Elgi Rubber

Very weak diversification

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

Pair Corralation between Compucom Software and Elgi Rubber

Assuming the 90 days trading horizon Compucom Software Limited is expected to generate 1.12 times more return on investment than Elgi Rubber. However, Compucom Software is 1.12 times more volatile than Elgi Rubber. It trades about -0.01 of its potential returns per unit of risk. Elgi Rubber is currently generating about -0.09 per unit of risk. If you would invest  2,066  in Compucom Software Limited on May 21, 2025 and sell it today you would lose (59.00) from holding Compucom Software Limited or give up 2.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Compucom Software Limited  vs.  Elgi Rubber

Compucom Software

Risk-Adjusted Performance

Weakest

Over the last 90 days Compucom Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Compucom Software is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Elgi Rubber

Risk-Adjusted Performance

Weakest

Over the last 90 days Elgi Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Compucom Software and Elgi Rubber

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

The idea behind Compucom Software Limited and Elgi Rubber 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.