Correlation Between Total Soft and N Citron

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

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

Diversification Opportunities for Total Soft and N Citron

-0.15

Correlation Coefficient

Total Soft  N Citron

Good diversification

The 3 months correlation between Total and 101400 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank and N Citron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N Citron and Total Soft 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 Total Soft Bank are associated (or correlated) with N Citron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N Citron has no effect on the direction of Total Soft i.e., Total Soft and N Citron go up and down completely randomly.

Pair Corralation between Total Soft and N Citron

Assuming the 90 days trading horizon Total Soft Bank is expected to generate 2.5 times more return on investment than N Citron. However, Total Soft is 2.5 times more volatile than N Citron. It trades about 0.04 of its potential returns per unit of risk. N Citron is currently generating about -0.11 per unit of risk. If you would invest  460,000  in Total Soft Bank on September 4, 2024 and sell it today you would earn a total of  28,500  from holding Total Soft Bank or generate 6.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Total Soft Bank  vs.  N Citron

Total Soft Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Total Soft sustained solid returns over the last few months and may actually be approaching a breakup point.

N Citron

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Total Soft and N Citron

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

The idea behind Total Soft Bank and N Citron 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.