Correlation Between US Financial and Propel Holdings

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

By analyzing existing cross correlation between US Financial 15 and Propel Holdings, you can compare the effects of market volatilities on US Financial 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 US Financial with a short position of Propel Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Financial and Propel Holdings.

Diversification Opportunities for US Financial and Propel Holdings

0.67

Correlation Coefficient

US Financial  Propel Holdings

Poor diversification

The 3 months correlation between FTU and Propel is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding US Financial 15 and Propel Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Propel Holdings and US Financial 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 US Financial 15 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 US Financial i.e., US Financial and Propel Holdings go up and down completely randomly.

Pair Corralation between US Financial and Propel Holdings

Assuming the 90 days trading horizon US Financial is expected to generate 1.52 times less return on investment than Propel Holdings. In addition to that, US Financial is 1.98 times more volatile than Propel Holdings. It trades about 0.04 of its total potential returns per unit of risk. Propel Holdings is currently generating about 0.12 per unit of volatility. If you would invest  668.00  in Propel Holdings on October 8, 2024 and sell it today you would earn a total of  3,032  from holding Propel Holdings or generate 453.89% return on investment over 90 days.

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

US Financial 15  vs.  Propel Holdings

US Financial 15

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, US Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Propel Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Propel Holdings are ranked lower than 9 (%) 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 US Financial and Propel Holdings

The main advantage of trading using opposite US Financial and Propel Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Financial 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 US Financial 15 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .