Correlation Between Model N and PAR Technology

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

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

Diversification Opportunities for Model N and PAR Technology

0.33

Correlation Coefficient

Model N  PAR Technology

Weak diversification

The 3 months correlation between Model and PAR is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Model N and PAR Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAR Technology and Model N 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 Model N are associated (or correlated) with PAR Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAR Technology has no effect on the direction of Model N i.e., Model N and PAR Technology go up and down completely randomly.

Pair Corralation between Model N and PAR Technology

Given the investment horizon of 90 days Model N is expected to generate 0.62 times more return on investment than PAR Technology. However, Model N is 1.61 times less risky than PAR Technology. It trades about 0.19 of its potential returns per unit of risk. PAR Technology is currently generating about 0.04 per unit of risk. If you would invest  2,474  in Model N on March 4, 2024 and sell it today you would earn a total of  515.00  from holding Model N or generate 20.82% return on investment over 90 days.

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

Model N  vs.  PAR Technology

Model N

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Model N are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Model N displayed solid returns over the last few months and may actually be approaching a breakup point.

PAR Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PAR Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, PAR Technology may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Model N and PAR Technology

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

The idea behind Model N and PAR Technology 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.