Correlation Between Research Solutions and ProStar Holdings

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

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

Diversification Opportunities for Research Solutions and ProStar Holdings

-0.37

Correlation Coefficient

Research Solutions  ProStar Holdings

Very good diversification

The 3 months correlation between Research and ProStar is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Research Solutions and ProStar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProStar Holdings and Research Solutions 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 Research Solutions 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 Research Solutions i.e., Research Solutions and ProStar Holdings go up and down completely randomly.

Pair Corralation between Research Solutions and ProStar Holdings

Given the investment horizon of 90 days Research Solutions is expected to under-perform the ProStar Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Research Solutions is 3.68 times less risky than ProStar Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The ProStar Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8.00  in ProStar Holdings on November 29, 2024 and sell it today you would earn a total of  4.00  from holding ProStar Holdings or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Research Solutions  vs.  ProStar Holdings

Research Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Research Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

ProStar Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProStar Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ProStar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Research Solutions and ProStar Holdings

The main advantage of trading using opposite Research Solutions and ProStar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Research Solutions 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 Research Solutions 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.