Correlation Between Computer Age and Hi Tech

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

By analyzing existing cross correlation between Computer Age Management and The Hi Tech Gears, you can compare the effects of market volatilities on Computer Age and Hi Tech 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 Computer Age with a short position of Hi Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Age and Hi Tech.

Diversification Opportunities for Computer Age and Hi Tech

0.78

Correlation Coefficient

Computer Age  Hi Tech

Poor diversification

The 3 months correlation between Computer and HITECHGEAR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and The Hi Tech Gears in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech and Computer Age 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 Computer Age Management are associated (or correlated) with Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech has no effect on the direction of Computer Age i.e., Computer Age and Hi Tech go up and down completely randomly.

Pair Corralation between Computer Age and Hi Tech

Assuming the 90 days trading horizon Computer Age is expected to generate 1.02 times less return on investment than Hi Tech. But when comparing it to its historical volatility, Computer Age Management is 1.1 times less risky than Hi Tech. It trades about 0.05 of its potential returns per unit of risk. The Hi Tech Gears is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  64,230  in The Hi Tech Gears on April 20, 2025 and sell it today you would earn a total of  3,610  from holding The Hi Tech Gears or generate 5.62% return on investment over 90 days.

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

Computer Age Management  vs.  The Hi Tech Gears

Computer Age Management

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Computer Age may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Hi Tech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Hi Tech Gears are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Hi Tech may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Computer Age and Hi Tech

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

The idea behind Computer Age Management and The Hi Tech Gears 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .