Correlation Between Information Services and ProAm Explorations

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

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

Diversification Opportunities for Information Services and ProAm Explorations

-0.23

Correlation Coefficient

Information Services  ProAm Explorations

Very good diversification

The 3 months correlation between Information and ProAm is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Information Services and ProAm Explorations Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProAm Explorations Corp and Information Services 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 Information Services are associated (or correlated) with ProAm Explorations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProAm Explorations Corp has no effect on the direction of Information Services i.e., Information Services and ProAm Explorations go up and down completely randomly.

Pair Corralation between Information Services and ProAm Explorations

Assuming the 90 days trading horizon Information Services is expected to under-perform the ProAm Explorations. But the stock apears to be less risky and, when comparing its historical volatility, Information Services is 4.87 times less risky than ProAm Explorations. The stock trades about -0.05 of its potential returns per unit of risk. The ProAm Explorations Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3.00  in ProAm Explorations Corp on December 22, 2024 and sell it today you would earn a total of  1.00  from holding ProAm Explorations Corp or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Information Services  vs.  ProAm Explorations Corp

Information Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Information Services is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ProAm Explorations Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProAm Explorations Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ProAm Explorations showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Information Services and ProAm Explorations

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

The idea behind Information Services and ProAm Explorations Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.