Correlation Between Proact IT and Net Insight

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

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

Diversification Opportunities for Proact IT and Net Insight

0.15

Correlation Coefficient

Proact IT  Net Insight

Average diversification

The 3 months correlation between Proact and Net is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Proact IT Group and Net Insight AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Net Insight AB and Proact IT 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 Proact IT Group are associated (or correlated) with Net Insight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Net Insight AB has no effect on the direction of Proact IT i.e., Proact IT and Net Insight go up and down completely randomly.

Pair Corralation between Proact IT and Net Insight

Assuming the 90 days trading horizon Proact IT Group is expected to under-perform the Net Insight. But the stock apears to be less risky and, when comparing its historical volatility, Proact IT Group is 1.39 times less risky than Net Insight. The stock trades about -0.17 of its potential returns per unit of risk. The Net Insight AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  700.00  in Net Insight AB on September 12, 2024 and sell it today you would earn a total of  55.00  from holding Net Insight AB or generate 7.86% return on investment over 90 days.

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

Proact IT Group  vs.  Net Insight AB

Proact IT Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Proact IT Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Net Insight AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Net Insight AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Net Insight may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Proact IT and Net Insight

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

The idea behind Proact IT Group and Net Insight AB 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.