Correlation Between Kelly Services and Psychemedics

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

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

Diversification Opportunities for Kelly Services and Psychemedics

-0.42

Correlation Coefficient

Kelly Services  Psychemedics

Very good diversification

The 3 months correlation between Kelly and Psychemedics is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kelly Services A and Psychemedics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Psychemedics and Kelly 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 Kelly Services A are associated (or correlated) with Psychemedics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Psychemedics has no effect on the direction of Kelly Services i.e., Kelly Services and Psychemedics go up and down completely randomly.

Pair Corralation between Kelly Services and Psychemedics

Assuming the 90 days horizon Kelly Services A is expected to generate 0.58 times more return on investment than Psychemedics. However, Kelly Services A is 1.74 times less risky than Psychemedics. It trades about 0.0 of its potential returns per unit of risk. Psychemedics is currently generating about -0.01 per unit of risk. If you would invest  1,632  in Kelly Services A on September 15, 2024 and sell it today you would lose (249.00) from holding Kelly Services A or give up 15.26% of portfolio value over 90 days.

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

Kelly Services A  vs.  Psychemedics

Kelly Services A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kelly Services A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Psychemedics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Psychemedics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Psychemedics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kelly Services and Psychemedics

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

The idea behind Kelly Services A and Psychemedics 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.