Correlation Between Progress Software and PROS Holdings

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

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

Diversification Opportunities for Progress Software and PROS Holdings

0.62

Correlation Coefficient

Progress Software  PROS Holdings

Poor diversification

The 3 months correlation between Progress and PROS is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Progress Software and PROS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROS Holdings and Progress Software 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 Progress Software are associated (or correlated) with PROS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROS Holdings has no effect on the direction of Progress Software i.e., Progress Software and PROS Holdings go up and down completely randomly.

Pair Corralation between Progress Software and PROS Holdings

Given the investment horizon of 90 days Progress Software is expected to generate 1.51 times less return on investment than PROS Holdings. But when comparing it to its historical volatility, Progress Software is 1.54 times less risky than PROS Holdings. It trades about 0.14 of its potential returns per unit of risk. PROS Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,834  in PROS Holdings on September 3, 2024 and sell it today you would earn a total of  483.00  from holding PROS Holdings or generate 26.34% return on investment over 90 days.

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

Progress Software  vs.  PROS Holdings

Progress Software

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Progress Software are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Progress Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

PROS Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PROS Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, PROS Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Progress Software and PROS Holdings

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

The idea behind Progress Software and PROS Holdings 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.