Correlation Between CRA International and PBTS Old

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

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

Diversification Opportunities for CRA International and PBTS Old

0.11

Correlation Coefficient

CRA International  PBTS Old

Average diversification

The 3 months correlation between CRA and PBTS is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and PBTS Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBTS Old and CRA International 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 CRA International are associated (or correlated) with PBTS Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBTS Old has no effect on the direction of CRA International i.e., CRA International and PBTS Old go up and down completely randomly.

Pair Corralation between CRA International and PBTS Old

Given the investment horizon of 90 days CRA International is expected to generate 53.2 times less return on investment than PBTS Old. But when comparing it to its historical volatility, CRA International is 42.77 times less risky than PBTS Old. It trades about 0.05 of its potential returns per unit of risk. PBTS Old is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  363.00  in PBTS Old on October 13, 2024 and sell it today you would lose (333.00) from holding PBTS Old or give up 91.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	25.6%
Values	Daily Returns

CRA International  vs.  PBTS Old

CRA International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CRA International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CRA International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

PBTS Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PBTS Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PBTS Old is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CRA International and PBTS Old

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

The idea behind CRA International and PBTS Old 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.