Correlation Between Psychemedics and Rushnet

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

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

Diversification Opportunities for Psychemedics and Rushnet

-0.42

Correlation Coefficient

Psychemedics  Rushnet

Very good diversification

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

Pair Corralation between Psychemedics and Rushnet

Considering the 90-day investment horizon Psychemedics is expected to generate 58.87 times less return on investment than Rushnet. But when comparing it to its historical volatility, Psychemedics is 7.1 times less risky than Rushnet. It trades about 0.01 of its potential returns per unit of risk. Rushnet is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Rushnet on September 15, 2024 and sell it today you would lose (0.01) from holding Rushnet or give up 50.0% of portfolio value over 90 days.

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

Psychemedics  vs.  Rushnet

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.

Rushnet

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rushnet are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical indicators, Rushnet displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Psychemedics and Rushnet

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

The idea behind Psychemedics and Rushnet 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.