Correlation Between HMS Networks and Proact IT
Can any of the company-specific risk be diversified away by investing in both HMS Networks and Proact IT 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 HMS Networks and Proact IT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMS Networks AB and Proact IT Group, you can compare the effects of market volatilities on HMS Networks and Proact IT 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 HMS Networks with a short position of Proact IT. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMS Networks and Proact IT.
Diversification Opportunities for HMS Networks and Proact IT
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HMS and Proact is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding HMS Networks AB and Proact IT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proact IT Group and HMS Networks 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 HMS Networks AB are associated (or correlated) with Proact IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proact IT Group has no effect on the direction of HMS Networks i.e., HMS Networks and Proact IT go up and down completely randomly.
Pair Corralation between HMS Networks and Proact IT
Assuming the 90 days trading horizon HMS Networks AB is expected to under-perform the Proact IT. In addition to that, HMS Networks is 1.45 times more volatile than Proact IT Group. It trades about -0.1 of its total potential returns per unit of risk. Proact IT Group is currently generating about -0.14 per unit of volatility. If you would invest 14,000 in Proact IT Group on August 30, 2024 and sell it today you would lose (580.00) from holding Proact IT Group or give up 4.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HMS Networks AB vs. Proact IT Group
Performance |
| Timeline |
| HMS Networks AB |
| Proact IT Group |
HMS Networks and Proact IT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMS Networks and Proact IT
The main advantage of trading using opposite HMS Networks and Proact IT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMS Networks position performs unexpectedly, Proact IT 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 Proact IT will offset losses from the drop in Proact IT's long position.| HMS Networks vs. Vitec Software Group | HMS Networks vs. Troax Group AB | HMS Networks vs. Sectra AB | HMS Networks vs. Addnode Group AB |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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