Correlation Between Trk Corp and Professional Computer

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

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

Diversification Opportunities for Trk Corp and Professional Computer

-0.62

Correlation Coefficient

Trk Corp  Professional Computer

Excellent diversification

The 3 months correlation between Trk and Professional is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Trk Corp and Professional Computer Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Professional Computer and Trk Corp 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 Trk Corp are associated (or correlated) with Professional Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Professional Computer has no effect on the direction of Trk Corp i.e., Trk Corp and Professional Computer go up and down completely randomly.

Pair Corralation between Trk Corp and Professional Computer

Assuming the 90 days trading horizon Trk Corp is expected to generate 0.8 times more return on investment than Professional Computer. However, Trk Corp is 1.25 times less risky than Professional Computer. It trades about 0.23 of its potential returns per unit of risk. Professional Computer Technology is currently generating about -0.29 per unit of risk. If you would invest  1,995  in Trk Corp on October 9, 2024 and sell it today you would earn a total of  85.00  from holding Trk Corp or generate 4.26% return on investment over 90 days.

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

Trk Corp  vs.  Professional Computer Technolo

Trk Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trk Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Trk Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Professional Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Professional Computer Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Trk Corp and Professional Computer

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

The idea behind Trk Corp and Professional Computer 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.