Correlation Between RenoWorks Software and ProStar Holdings

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

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

Diversification Opportunities for RenoWorks Software and ProStar Holdings

0.1

Correlation Coefficient

RenoWorks Software  ProStar Holdings

Average diversification

The 3 months correlation between RenoWorks and ProStar is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding RenoWorks Software and ProStar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProStar Holdings and RenoWorks Software 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 RenoWorks Software are associated (or correlated) with ProStar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProStar Holdings has no effect on the direction of RenoWorks Software i.e., RenoWorks Software and ProStar Holdings go up and down completely randomly.

Pair Corralation between RenoWorks Software and ProStar Holdings

Assuming the 90 days horizon RenoWorks Software is expected to generate 19.24 times more return on investment than ProStar Holdings. However, RenoWorks Software is 19.24 times more volatile than ProStar Holdings. It trades about 0.11 of its potential returns per unit of risk. ProStar Holdings is currently generating about -0.11 per unit of risk. If you would invest  18.00  in RenoWorks Software on September 2, 2024 and sell it today you would lose (2.00) from holding RenoWorks Software or give up 11.11% of portfolio value over 90 days.

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

RenoWorks Software  vs.  ProStar Holdings

RenoWorks Software

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RenoWorks Software are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, RenoWorks Software reported solid returns over the last few months and may actually be approaching a breakup point.

ProStar Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProStar Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with RenoWorks Software and ProStar Holdings

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

The idea behind RenoWorks Software and ProStar Holdings 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 Anywhere module to track or share privately all of your investments from the convenience of any device.