Correlation Between North American and Propel Holdings

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

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

Diversification Opportunities for North American and Propel Holdings

0.91

Correlation Coefficient

North American  Propel Holdings

Almost no diversification

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

Pair Corralation between North American and Propel Holdings

Assuming the 90 days trading horizon North American is expected to generate 2.01 times less return on investment than Propel Holdings. But when comparing it to its historical volatility, North American Financial is 1.41 times less risky than Propel Holdings. It trades about 0.1 of its potential returns per unit of risk. Propel Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  819.00  in Propel Holdings on September 12, 2024 and sell it today you would earn a total of  2,709  from holding Propel Holdings or generate 330.77% return on investment over 90 days.

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

North American Financial  vs.  Propel Holdings

North American Financial

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in North American Financial are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, North American displayed solid returns over the last few months and may actually be approaching a breakup point.

Propel Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Propel Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Propel Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with North American and Propel Holdings

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

The idea behind North American Financial and Propel 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.