Correlation Between Red Violet and ProStar Holdings

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

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

Diversification Opportunities for Red Violet and ProStar Holdings

-0.91

Correlation Coefficient

Red Violet  ProStar Holdings

Pay attention - limited upside

The 3 months correlation between Red and ProStar is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Red Violet and ProStar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProStar Holdings and Red Violet 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 Red Violet are associated (or correlated) with ProStar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProStar Holdings has no effect on the direction of Red Violet i.e., Red Violet and ProStar Holdings go up and down completely randomly.

Pair Corralation between Red Violet and ProStar Holdings

Given the investment horizon of 90 days Red Violet is expected to under-perform the ProStar Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Red Violet is 4.46 times less risky than ProStar Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The ProStar Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9.17  in ProStar Holdings on October 1, 2024 and sell it today you would lose (0.07) from holding ProStar Holdings or give up 0.76% of portfolio value over 90 days.

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

Red Violet  vs.  ProStar Holdings

Red Violet

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Red Violet are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Red Violet unveiled solid returns over the last few months and may actually be approaching a breakup point.

ProStar Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProStar Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Red Violet and ProStar Holdings

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

The idea behind Red Violet and ProStar Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.