Correlation Between Formula Systems and Chindata Group

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

By analyzing existing cross correlation between Formula Systems 1985 and Chindata Group Holdings, you can compare the effects of market volatilities on Formula Systems and Chindata Group 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 Formula Systems with a short position of Chindata Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and Chindata Group.

Diversification Opportunities for Formula Systems and Chindata Group

Very good diversification

The 3 months correlation between Formula and Chindata is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and Chindata Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chindata Group Holdings and Formula Systems 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 Formula Systems 1985 are associated (or correlated) with Chindata Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chindata Group Holdings has no effect on the direction of Formula Systems i.e., Formula Systems and Chindata Group go up and down completely randomly.

Pair Corralation between Formula Systems and Chindata Group

Assuming the 90 days horizon Formula Systems 1985 is expected to under-perform the Chindata Group. In addition to that, Formula Systems is 4.36 times more volatile than Chindata Group Holdings. It trades about -0.1 of its total potential returns per unit of risk. Chindata Group Holdings is currently generating about 0.12 per unit of volatility. If you would invest  824.00  in Chindata Group Holdings on June 25, 2023 and sell it today you would earn a total of  8.00  from holding Chindata Group Holdings or generate 0.97% return on investment over 90 days.

Formula Systems 1985  vs.  Chindata Group Holdings

Formula Systems 1985

Formula Performance

0 of 100

Over the last 90 days Formula Systems 1985 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Formula Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chindata Group Holdings

Chindata Performance

10 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Chindata Group Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Chindata Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Formula Systems and Chindata Group

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

The idea behind Formula Systems 1985 and Chindata Group Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .