Correlation Between USU Software and SHELF DRILLING

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

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

Diversification Opportunities for USU Software and SHELF DRILLING

0.83

Correlation Coefficient

USU Software  SHELF DRILLING

Very poor diversification

The 3 months correlation between USU and SHELF is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding USU Software AG and SHELF DRILLING LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHELF DRILLING LTD and USU Software 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 USU Software AG are associated (or correlated) with SHELF DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHELF DRILLING LTD has no effect on the direction of USU Software i.e., USU Software and SHELF DRILLING go up and down completely randomly.

Pair Corralation between USU Software and SHELF DRILLING

Assuming the 90 days trading horizon USU Software AG is expected to under-perform the SHELF DRILLING. But the stock apears to be less risky and, when comparing its historical volatility, USU Software AG is 2.68 times less risky than SHELF DRILLING. The stock trades about -0.23 of its potential returns per unit of risk. The SHELF DRILLING LTD is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  58.00  in SHELF DRILLING LTD on April 6, 2025 and sell it today you would earn a total of  12.00  from holding SHELF DRILLING LTD or generate 20.69% return on investment over 90 days.

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

USU Software AG  vs.  SHELF DRILLING LTD

USU Software AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in USU Software AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, USU Software reported solid returns over the last few months and may actually be approaching a breakup point.

SHELF DRILLING LTD

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SHELF DRILLING LTD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SHELF DRILLING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with USU Software and SHELF DRILLING

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

The idea behind USU Software AG and SHELF DRILLING LTD 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.