Correlation Between Indian Railway and Compucom Software

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

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

Diversification Opportunities for Indian Railway and Compucom Software

0.86

Correlation Coefficient

Indian Railway  Compucom Software

Very poor diversification

The 3 months correlation between Indian and Compucom is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Indian Railway Finance and Compucom Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compucom Software and Indian Railway 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 Indian Railway Finance are associated (or correlated) with Compucom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compucom Software has no effect on the direction of Indian Railway i.e., Indian Railway and Compucom Software go up and down completely randomly.

Pair Corralation between Indian Railway and Compucom Software

Assuming the 90 days trading horizon Indian Railway is expected to generate 1.9 times less return on investment than Compucom Software. But when comparing it to its historical volatility, Indian Railway Finance is 1.32 times less risky than Compucom Software. It trades about 0.02 of its potential returns per unit of risk. Compucom Software Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,964  in Compucom Software Limited on May 4, 2025 and sell it today you would earn a total of  61.00  from holding Compucom Software Limited or generate 3.11% return on investment over 90 days.

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

Indian Railway Finance  vs.  Compucom Software Limited

Indian Railway Finance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Railway Finance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Indian Railway is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Compucom Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compucom Software Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Compucom Software is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Indian Railway and Compucom Software

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

The idea behind Indian Railway Finance and Compucom Software Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.