Correlation Between Kforce and Psychemedics

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

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

Diversification Opportunities for Kforce and Psychemedics

0.2

Correlation Coefficient

Kforce  Psychemedics

Modest diversification

The 3 months correlation between Kforce and Psychemedics is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kforce Inc and Psychemedics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Psychemedics and Kforce 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 Kforce Inc 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 Kforce i.e., Kforce and Psychemedics go up and down completely randomly.

Pair Corralation between Kforce and Psychemedics

Given the investment horizon of 90 days Kforce Inc is expected to under-perform the Psychemedics. But the stock apears to be less risky and, when comparing its historical volatility, Kforce Inc is 3.03 times less risky than Psychemedics. The stock trades about -0.01 of its potential returns per unit of risk. The Psychemedics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Psychemedics on September 16, 2024 and sell it today you would earn a total of  35.00  from holding Psychemedics or generate 15.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Kforce Inc  vs.  Psychemedics

Kforce Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kforce Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Kforce is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Kforce and Psychemedics

The main advantage of trading using opposite Kforce and Psychemedics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kforce 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 Kforce Inc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.