Correlation Between Propel Holdings and Renoworks Software

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

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

Diversification Opportunities for Propel Holdings and Renoworks Software

0.81

Correlation Coefficient

Propel Holdings  Renoworks Software

Very poor diversification

The 3 months correlation between Propel and Renoworks is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Propel Holdings and Renoworks Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renoworks Software and Propel 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 Propel Holdings are associated (or correlated) with Renoworks Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renoworks Software has no effect on the direction of Propel Holdings i.e., Propel Holdings and Renoworks Software go up and down completely randomly.

Pair Corralation between Propel Holdings and Renoworks Software

Assuming the 90 days trading horizon Propel Holdings is expected to generate 6.18 times less return on investment than Renoworks Software. But when comparing it to its historical volatility, Propel Holdings is 1.26 times less risky than Renoworks Software. It trades about 0.02 of its potential returns per unit of risk. Renoworks Software is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Renoworks Software on October 6, 2024 and sell it today you would earn a total of  3.00  from holding Renoworks Software or generate 12.0% return on investment over 90 days.

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

Propel Holdings  vs.  Renoworks Software

Propel Holdings

Risk-Adjusted Performance

9 of 100

OK

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

Renoworks Software

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Propel Holdings and Renoworks Software

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

The idea behind Propel Holdings and Renoworks Software 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.