Correlation Between Conduent and Innodata

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

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

Diversification Opportunities for Conduent and Innodata

0.6

Correlation Coefficient

Conduent  Innodata

Poor diversification

The 3 months correlation between Conduent and Innodata is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Conduent and Innodata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innodata and Conduent 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 Conduent are associated (or correlated) with Innodata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innodata has no effect on the direction of Conduent i.e., Conduent and Innodata go up and down completely randomly.

Pair Corralation between Conduent and Innodata

Given the investment horizon of 90 days Conduent is expected to generate 0.84 times more return on investment than Innodata. However, Conduent is 1.19 times less risky than Innodata. It trades about 0.23 of its potential returns per unit of risk. Innodata is currently generating about 0.0 per unit of risk. If you would invest  324.00  in Conduent on February 5, 2024 and sell it today you would earn a total of  63.00  from holding Conduent or generate 19.44% return on investment over 90 days.

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

Conduent  vs.  Innodata

Conduent

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Conduent are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Conduent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Innodata

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innodata has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Conduent and Innodata

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

The idea behind Conduent and Innodata 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.