Correlation Between Absolute Software and Abovenet Communications

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

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

Diversification Opportunities for Absolute Software and Abovenet Communications

0.0

Correlation Coefficient

Absolute Software  Abovenet Communications

Pay attention - limited upside

The 3 months correlation between Absolute and Abovenet is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Software and Abovenet Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abovenet Communications and Absolute 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 Absolute Software are associated (or correlated) with Abovenet Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abovenet Communications has no effect on the direction of Absolute Software i.e., Absolute Software and Abovenet Communications go up and down completely randomly.

Pair Corralation between Absolute Software and Abovenet Communications

If you would invest  1,142  in Absolute Software on January 19, 2024 and sell it today you would earn a total of  7.00  from holding Absolute Software or generate 0.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Absolute Software  vs.  Abovenet Communications

Absolute Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Absolute Software is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Abovenet Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abovenet Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Abovenet Communications is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Absolute Software and Abovenet Communications

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

The idea behind Absolute Software and Abovenet Communications 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.