Correlation Between RadNet and ProPhase Labs

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

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

Diversification Opportunities for RadNet and ProPhase Labs

-0.94

Correlation Coefficient

RadNet  ProPhase Labs

Pay attention - limited upside

The 3 months correlation between RadNet and ProPhase is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding RadNet Inc and ProPhase Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProPhase Labs and RadNet 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 RadNet Inc 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 RadNet i.e., RadNet and ProPhase Labs go up and down completely randomly.

Pair Corralation between RadNet and ProPhase Labs

Given the investment horizon of 90 days RadNet Inc is expected to generate 0.4 times more return on investment than ProPhase Labs. However, RadNet Inc is 2.48 times less risky than ProPhase Labs. It trades about 0.09 of its potential returns per unit of risk. ProPhase Labs is currently generating about -0.23 per unit of risk. If you would invest  6,681  in RadNet Inc on September 17, 2024 and sell it today you would earn a total of  1,104  from holding RadNet Inc or generate 16.52% return on investment over 90 days.

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

RadNet Inc  vs.  ProPhase Labs

RadNet Inc

Risk-Adjusted Performance

7 of 100

OK

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

ProPhase Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProPhase Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with RadNet and ProPhase Labs

The main advantage of trading using opposite RadNet and ProPhase Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RadNet 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 RadNet Inc 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.