Correlation Between Tradeweb Markets and PRA

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

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

Diversification Opportunities for Tradeweb Markets and PRA

-0.34

Correlation Coefficient

Tradeweb Markets  PRA

Very good diversification

The 3 months correlation between Tradeweb and PRA is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Tradeweb Markets and PRA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRA Group and Tradeweb Markets 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 Tradeweb Markets are associated (or correlated) with PRA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRA Group has no effect on the direction of Tradeweb Markets i.e., Tradeweb Markets and PRA go up and down completely randomly.

Pair Corralation between Tradeweb Markets and PRA

Allowing for the 90-day total investment horizon Tradeweb Markets is expected to generate 0.41 times more return on investment than PRA. However, Tradeweb Markets is 2.47 times less risky than PRA. It trades about 0.13 of its potential returns per unit of risk. PRA Group is currently generating about -0.04 per unit of risk. If you would invest  12,156  in Tradeweb Markets on September 26, 2024 and sell it today you would earn a total of  1,274  from holding Tradeweb Markets or generate 10.48% return on investment over 90 days.

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

Tradeweb Markets  vs.  PRA Group

Tradeweb Markets

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tradeweb Markets may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PRA Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PRA Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal 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 Tradeweb Markets and PRA

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

The idea behind Tradeweb Markets and PRA Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.