Correlation Between Data Storage and CSP

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

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

Diversification Opportunities for Data Storage and CSP

0.31

Correlation Coefficient

Data Storage  CSP

Weak diversification

The 3 months correlation between Data and CSP is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Data Storage Corp and CSP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSP Inc and Data Storage 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 Data Storage Corp are associated (or correlated) with CSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSP Inc has no effect on the direction of Data Storage i.e., Data Storage and CSP go up and down completely randomly.

Pair Corralation between Data Storage and CSP

Given the investment horizon of 90 days Data Storage Corp is expected to generate 1.44 times more return on investment than CSP. However, Data Storage is 1.44 times more volatile than CSP Inc. It trades about 0.18 of its potential returns per unit of risk. CSP Inc is currently generating about 0.02 per unit of risk. If you would invest  455.00  in Data Storage Corp on March 22, 2024 and sell it today you would earn a total of  175.00  from holding Data Storage Corp or generate 38.46% return on investment over 90 days.

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

Data Storage Corp  vs.  CSP Inc

Data Storage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

CSP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Data Storage and CSP

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

The idea behind Data Storage Corp and CSP Inc 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 Global Correlations module to find global opportunities by holding instruments from different markets.