Correlation Between ProAm Explorations and Converge Technology

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

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

Diversification Opportunities for ProAm Explorations and Converge Technology

0.48

Correlation Coefficient

ProAm Explorations  Converge Technology

Very weak diversification

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

Pair Corralation between ProAm Explorations and Converge Technology

Assuming the 90 days horizon ProAm Explorations is expected to generate 1.45 times less return on investment than Converge Technology. In addition to that, ProAm Explorations is 1.12 times more volatile than Converge Technology Solutions. It trades about 0.1 of its total potential returns per unit of risk. Converge Technology Solutions is currently generating about 0.16 per unit of volatility. If you would invest  313.00  in Converge Technology Solutions on December 21, 2024 and sell it today you would earn a total of  233.00  from holding Converge Technology Solutions or generate 74.44% return on investment over 90 days.

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

ProAm Explorations Corp  vs.  Converge Technology Solutions

ProAm Explorations Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProAm Explorations Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ProAm Explorations showed solid returns over the last few months and may actually be approaching a breakup point.

Converge Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Converge Technology Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Converge Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProAm Explorations and Converge Technology

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

The idea behind ProAm Explorations Corp and Converge Technology Solutions 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.