Correlation Between Red Violet and PAR Technology

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

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

Diversification Opportunities for Red Violet and PAR Technology

0.96

Correlation Coefficient

Red Violet  PAR Technology

Almost no diversification

The 3 months correlation between Red and PAR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Red Violet and PAR Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAR Technology 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 PAR Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAR Technology has no effect on the direction of Red Violet i.e., Red Violet and PAR Technology go up and down completely randomly.

Pair Corralation between Red Violet and PAR Technology

Given the investment horizon of 90 days Red Violet is expected to generate 1.15 times less return on investment than PAR Technology. In addition to that, Red Violet is 1.09 times more volatile than PAR Technology. It trades about 0.15 of its total potential returns per unit of risk. PAR Technology is currently generating about 0.19 per unit of volatility. If you would invest  5,595  in PAR Technology on September 22, 2024 and sell it today you would earn a total of  1,955  from holding PAR Technology or generate 34.94% return on investment over 90 days.

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

Red Violet  vs.  PAR Technology

Red Violet

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Red Violet are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Red Violet unveiled solid returns over the last few months and may actually be approaching a breakup point.

PAR Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PAR Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PAR Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Violet and PAR Technology

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

The idea behind Red Violet and PAR Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.