Correlation Between Precipio and ProPhase Labs

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

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

Diversification Opportunities for Precipio and ProPhase Labs

-0.42

Correlation Coefficient

Precipio  ProPhase Labs

Very good diversification

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

Pair Corralation between Precipio and ProPhase Labs

Given the investment horizon of 90 days Precipio is expected to generate 0.44 times more return on investment than ProPhase Labs. However, Precipio is 2.29 times less risky than ProPhase Labs. It trades about 0.05 of its potential returns per unit of risk. ProPhase Labs is currently generating about 0.0 per unit of risk. If you would invest  580.00  in Precipio on December 29, 2024 and sell it today you would earn a total of  47.00  from holding Precipio or generate 8.1% return on investment over 90 days.

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

Precipio  vs.  ProPhase Labs

Precipio

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Precipio are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Precipio displayed solid returns over the last few months and may actually be approaching a breakup point.

ProPhase Labs

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProPhase Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ProPhase Labs is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Precipio and ProPhase Labs

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

The idea behind Precipio and ProPhase Labs 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..