Correlation Between PTC and Meridianlink

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

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

Diversification Opportunities for PTC and Meridianlink

0.55

Correlation Coefficient

PTC  Meridianlink

Very weak diversification

The 3 months correlation between PTC and Meridianlink is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding PTC Inc and Meridianlink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridianlink and PTC 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 PTC Inc are associated (or correlated) with Meridianlink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridianlink has no effect on the direction of PTC i.e., PTC and Meridianlink go up and down completely randomly.

Pair Corralation between PTC and Meridianlink

Considering the 90-day investment horizon PTC Inc is expected to generate 0.95 times more return on investment than Meridianlink. However, PTC Inc is 1.05 times less risky than Meridianlink. It trades about -0.2 of its potential returns per unit of risk. Meridianlink is currently generating about -0.31 per unit of risk. If you would invest  19,764  in PTC Inc on September 23, 2024 and sell it today you would lose (1,006) from holding PTC Inc or give up 5.09% of portfolio value over 90 days.

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

PTC Inc  vs.  Meridianlink

PTC Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PTC Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PTC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Meridianlink

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meridianlink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with PTC and Meridianlink

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

The idea behind PTC Inc and Meridianlink 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.