Correlation Between Information Services and Thinkific Labs

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

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

Diversification Opportunities for Information Services and Thinkific Labs

-0.4

Correlation Coefficient

Information Services  Thinkific Labs

Very good diversification

The 3 months correlation between Information and Thinkific is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Information Services and Thinkific Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thinkific Labs and Information Services 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 Information Services are associated (or correlated) with Thinkific Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thinkific Labs has no effect on the direction of Information Services i.e., Information Services and Thinkific Labs go up and down completely randomly.

Pair Corralation between Information Services and Thinkific Labs

Assuming the 90 days trading horizon Information Services is expected to under-perform the Thinkific Labs. But the stock apears to be less risky and, when comparing its historical volatility, Information Services is 3.6 times less risky than Thinkific Labs. The stock trades about -0.1 of its potential returns per unit of risk. The Thinkific Labs is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  296.00  in Thinkific Labs on September 15, 2024 and sell it today you would lose (6.00) from holding Thinkific Labs or give up 2.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Information Services  vs.  Thinkific Labs

Information Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Thinkific Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thinkific Labs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Thinkific Labs is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Information Services and Thinkific Labs

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

The idea behind Information Services and Thinkific Labs 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.