Correlation Between Parrot and Crossject

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

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

Diversification Opportunities for Parrot and Crossject

-0.6

Correlation Coefficient

Parrot  Crossject

Excellent diversification

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

Pair Corralation between Parrot and Crossject

Assuming the 90 days trading horizon Parrot is expected to under-perform the Crossject. But the stock apears to be less risky and, when comparing its historical volatility, Parrot is 1.27 times less risky than Crossject. The stock trades about -0.02 of its potential returns per unit of risk. The Crossject is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  344.00  in Crossject on September 24, 2024 and sell it today you would lose (146.00) from holding Crossject or give up 42.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Parrot  vs.  Crossject

Parrot

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parrot are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Parrot reported solid returns over the last few months and may actually be approaching a breakup point.

Crossject

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crossject has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Parrot and Crossject

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

The idea behind Parrot and Crossject 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.