Correlation Between ProStar Holdings and Shotspotter

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

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

Diversification Opportunities for ProStar Holdings and Shotspotter

0.48

Correlation Coefficient

ProStar Holdings  Shotspotter

Very weak diversification

The 3 months correlation between ProStar and Shotspotter is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ProStar Holdings and Shotspotter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shotspotter and ProStar Holdings 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 ProStar Holdings are associated (or correlated) with Shotspotter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shotspotter has no effect on the direction of ProStar Holdings i.e., ProStar Holdings and Shotspotter go up and down completely randomly.

Pair Corralation between ProStar Holdings and Shotspotter

Assuming the 90 days horizon ProStar Holdings is expected to generate 2.7 times more return on investment than Shotspotter. However, ProStar Holdings is 2.7 times more volatile than Shotspotter. It trades about 0.11 of its potential returns per unit of risk. Shotspotter is currently generating about 0.12 per unit of risk. If you would invest  8.00  in ProStar Holdings on November 29, 2024 and sell it today you would earn a total of  4.00  from holding ProStar Holdings or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

ProStar Holdings  vs.  Shotspotter

ProStar Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProStar Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ProStar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Shotspotter

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shotspotter are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Shotspotter demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProStar Holdings and Shotspotter

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

The idea behind ProStar Holdings and Shotspotter 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.