Correlation Between PROS Holdings and Meridianlink

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

By analyzing existing cross correlation between PROS Holdings and Meridianlink, you can compare the effects of market volatilities on PROS Holdings and Meridianlink 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 Meridianlink. Check out your portfolio center. Please also check ongoing floating volatility patterns of PROS Holdings and Meridianlink.

Diversification Opportunities for PROS Holdings and Meridianlink

0.67

Correlation Coefficient

PROS Holdings  Meridianlink

Poor diversification

The 3 months correlation between PROS and Meridianlink is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PROS Holdings and Meridianlink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridianlink 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 Meridianlink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridianlink has no effect on the direction of PROS Holdings i.e., PROS Holdings and Meridianlink go up and down completely randomly.

Pair Corralation between PROS Holdings and Meridianlink

Considering the 90-day investment horizon PROS Holdings is expected to under-perform the Meridianlink. In addition to that, PROS Holdings is 1.11 times more volatile than Meridianlink. It trades about -0.22 of its total potential returns per unit of risk. Meridianlink is currently generating about 0.0 per unit of volatility. If you would invest  1,682  in Meridianlink on February 13, 2024 and sell it today you would lose (9.00) from holding Meridianlink or give up 0.54% of portfolio value over 90 days.

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

PROS Holdings  vs.  Meridianlink

PROS Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PROS Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Meridianlink

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meridianlink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with PROS Holdings and Meridianlink

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

The idea behind PROS Holdings and Meridianlink 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.