Correlation Between Information Services and Formula Systems

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

By analyzing existing cross correlation between Information Services Group and Formula Systems 1985, you can compare the effects of market volatilities on Information Services 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 Information Services with a short position of Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Services and Formula Systems.

Diversification Opportunities for Information Services and Formula Systems

0.12

Correlation Coefficient

Information Services  Formula Systems

Average diversification

The 3 months correlation between Information and Formula is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Information Services 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 Information Services 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 Information Services 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 Information Services i.e., Information Services and Formula Systems go up and down completely randomly.

Pair Corralation between Information Services and Formula Systems

Considering the 90-day investment horizon Information Services Group is expected to generate 0.64 times more return on investment than Formula Systems. However, Information Services Group is 1.56 times less risky than Formula Systems. It trades about 0.42 of its potential returns per unit of risk. Formula Systems 1985 is currently generating about 0.03 per unit of risk. If you would invest  308.00  in Information Services Group on September 2, 2024 and sell it today you would earn a total of  61.00  from holding Information Services Group or generate 19.81% return on investment over 90 days.

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

Information Services Group  vs.  Formula Systems 1985

Information Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Formula Systems 1985

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Formula Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Information Services and Formula Systems

The main advantage of trading using opposite Information Services and Formula Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Services 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 Information Services 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.