Correlation Between EGain and Model N

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

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

Diversification Opportunities for EGain and Model N

0.15

Correlation Coefficient

EGain  Model N

Average diversification

The 3 months correlation between EGain and Model is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding eGain and Model N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Model N and EGain 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 eGain are associated (or correlated) with Model N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Model N has no effect on the direction of EGain i.e., EGain and Model N go up and down completely randomly.

Pair Corralation between EGain and Model N

Given the investment horizon of 90 days eGain is expected to under-perform the Model N. In addition to that, EGain is 62.65 times more volatile than Model N. It trades about -0.06 of its total potential returns per unit of risk. Model N is currently generating about 0.29 per unit of volatility. If you would invest  2,998  in Model N on June 22, 2024 and sell it today you would earn a total of  2.00  from holding Model N or generate 0.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	6.45%
Values	Daily Returns

eGain  vs.  Model N

eGain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eGain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in October 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Model N

Risk-Adjusted Performance

0 of 100

Solid

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

Pair Trading with EGain and Model N

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

The idea behind eGain and Model N 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.