Correlation Between PROS Holdings and Shopify
Can any of the company-specific risk be diversified away by investing in both PROS Holdings and Shopify 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 PROS Holdings and Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PROS Holdings and Shopify, you can compare the effects of market volatilities on PROS Holdings and Shopify 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 PROS Holdings with a short position of Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of PROS Holdings and Shopify.
Diversification Opportunities for PROS Holdings and Shopify
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PROS and Shopify is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding PROS Holdings and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify and PROS Holdings 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 PROS Holdings are associated (or correlated) with Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of PROS Holdings i.e., PROS Holdings and Shopify go up and down completely randomly.
Pair Corralation between PROS Holdings and Shopify
Considering the 90-day investment horizon PROS Holdings is expected to under-perform the Shopify. But the stock apears to be less risky and, when comparing its historical volatility, PROS Holdings is 1.03 times less risky than Shopify. The stock trades about -0.31 of its potential returns per unit of risk. The Shopify is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,438 in Shopify on February 6, 2024 and sell it today you would earn a total of 109.00 from holding Shopify or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PROS Holdings vs. Shopify
Performance |
| Timeline |
| PROS Holdings |
| Shopify |
PROS Holdings and Shopify Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PROS Holdings and Shopify
The main advantage of trading using opposite PROS Holdings and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PROS Holdings position performs unexpectedly, Shopify 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 Shopify will offset losses from the drop in Shopify's long position.The idea behind PROS Holdings and Shopify 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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