Correlation Between CSP and Formula Systems
Can any of the company-specific risk be diversified away by investing in both CSP and Formula Systems 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 CSP and Formula Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSP Inc and Formula Systems 1985, you can compare the effects of market volatilities on CSP and Formula Systems 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 CSP with a short position of Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSP and Formula Systems.
Diversification Opportunities for CSP and Formula Systems
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CSP and Formula is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding CSP Inc and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 and CSP 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 CSP Inc are associated (or correlated) with Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of CSP i.e., CSP and Formula Systems go up and down completely randomly.
Pair Corralation between CSP and Formula Systems
Given the investment horizon of 90 days CSP Inc is expected to under-perform the Formula Systems. In addition to that, CSP is 1.32 times more volatile than Formula Systems 1985. It trades about -0.07 of its total potential returns per unit of risk. Formula Systems 1985 is currently generating about 0.22 per unit of volatility. If you would invest 8,609 in Formula Systems 1985 on April 13, 2025 and sell it today you would earn a total of 4,341 from holding Formula Systems 1985 or generate 50.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.39% |
| Values | Daily Returns |
CSP Inc vs. Formula Systems 1985
Performance |
| Timeline |
| CSP Inc |
| Formula Systems 1985 |
CSP and Formula Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSP and Formula Systems
The main advantage of trading using opposite CSP and Formula Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSP position performs unexpectedly, Formula Systems 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 Formula Systems will offset losses from the drop in Formula Systems' long position.The idea behind CSP Inc and Formula Systems 1985 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.| Formula Systems vs. The Hackett Group | Formula Systems vs. CSP Inc | Formula Systems vs. Nayax | Formula Systems vs. Magic Software Enterprises |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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