Correlation Between Karooooo and PROS Holdings

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

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

Diversification Opportunities for Karooooo and PROS Holdings

0.51

Correlation Coefficient

Karooooo  PROS Holdings

Very weak diversification

The 3 months correlation between Karooooo and PROS is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Karooooo and PROS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROS Holdings and Karooooo 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 Karooooo are associated (or correlated) with PROS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROS Holdings has no effect on the direction of Karooooo i.e., Karooooo and PROS Holdings go up and down completely randomly.

Pair Corralation between Karooooo and PROS Holdings

Given the investment horizon of 90 days Karooooo is expected to under-perform the PROS Holdings. In addition to that, Karooooo is 1.03 times more volatile than PROS Holdings. It trades about -0.02 of its total potential returns per unit of risk. PROS Holdings is currently generating about -0.02 per unit of volatility. If you would invest  2,184  in PROS Holdings on December 28, 2024 and sell it today you would lose (114.00) from holding PROS Holdings or give up 5.22% of portfolio value over 90 days.

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

Karooooo  vs.  PROS Holdings

Karooooo

Risk-Adjusted Performance

Very Weak

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

PROS Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Karooooo and PROS Holdings

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

The idea behind Karooooo and PROS 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.