Correlation Between Red Violet and PAR Technology

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

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

Diversification Opportunities for Red Violet and PAR Technology

-0.37

Correlation Coefficient

Red Violet  PAR Technology

Very good diversification

The 3 months correlation between Red and PAR is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Red Violet and PAR Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAR Technology and Red Violet 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 Red Violet are associated (or correlated) with PAR Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAR Technology has no effect on the direction of Red Violet i.e., Red Violet and PAR Technology go up and down completely randomly.

Pair Corralation between Red Violet and PAR Technology

Given the investment horizon of 90 days Red Violet is expected to generate 0.91 times more return on investment than PAR Technology. However, Red Violet is 1.09 times less risky than PAR Technology. It trades about -0.07 of its potential returns per unit of risk. PAR Technology is currently generating about -0.11 per unit of risk. If you would invest  3,921  in Red Violet on December 11, 2024 and sell it today you would lose (475.00) from holding Red Violet or give up 12.11% of portfolio value over 90 days.

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

Red Violet  vs.  PAR Technology

Red Violet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Violet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

PAR Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days PAR Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Red Violet and PAR Technology

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

The idea behind Red Violet and PAR Technology 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.