Correlation Between Trane Technologies and ABB

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

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

Diversification Opportunities for Trane Technologies and ABB

0.0

Correlation Coefficient

Trane Technologies  ABB

Pay attention - limited upside

The 3 months correlation between Trane and ABB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Trane Technologies 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 Trane Technologies plc are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Trane Technologies i.e., Trane Technologies and ABB go up and down completely randomly.

Pair Corralation between Trane Technologies and ABB

If you would invest  4,960  in ABB on September 3, 2024 and sell it today you would earn a total of  290.00  from holding ABB or generate 5.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Trane Technologies plc  vs.  ABB

Trane Technologies plc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Trane Technologies plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Trane Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ABB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, ABB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Trane Technologies and ABB

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

The idea behind Trane Technologies plc and ABB 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.