Correlation Between Innodata and Thoughtworks Holding

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

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

Diversification Opportunities for Innodata and Thoughtworks Holding

0.4

Correlation Coefficient

Innodata  Thoughtworks Holding

Very weak diversification

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

Pair Corralation between Innodata and Thoughtworks Holding

Given the investment horizon of 90 days Innodata is expected to generate 31.04 times more return on investment than Thoughtworks Holding. However, Innodata is 31.04 times more volatile than Thoughtworks Holding. It trades about 0.32 of its potential returns per unit of risk. Thoughtworks Holding is currently generating about 0.14 per unit of risk. If you would invest  1,709  in Innodata on August 13, 2024 and sell it today you would earn a total of  2,569  from holding Innodata or generate 150.32% return on investment over 90 days.

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

Innodata  vs.  Thoughtworks Holding

Innodata

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innodata are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Innodata exhibited solid returns over the last few months and may actually be approaching a breakup point.

Thoughtworks Holding

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thoughtworks Holding are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Thoughtworks Holding 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 Innodata and Thoughtworks Holding

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

The idea behind Innodata and Thoughtworks Holding 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.