Correlation Between Trane Technologies and DATAGROUP

Can any of the company-specific risk be diversified away by investing in both Trane Technologies and DATAGROUP 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 DATAGROUP 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 DATAGROUP SE, you can compare the effects of market volatilities on Trane Technologies and DATAGROUP 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 DATAGROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and DATAGROUP.

Diversification Opportunities for Trane Technologies and DATAGROUP

0.53

Correlation Coefficient

Trane Technologies  DATAGROUP

Very weak diversification

The 3 months correlation between Trane and DATAGROUP is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and DATAGROUP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATAGROUP SE 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 DATAGROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATAGROUP SE has no effect on the direction of Trane Technologies i.e., Trane Technologies and DATAGROUP go up and down completely randomly.

Pair Corralation between Trane Technologies and DATAGROUP

Assuming the 90 days horizon Trane Technologies plc is expected to generate 0.6 times more return on investment than DATAGROUP. However, Trane Technologies plc is 1.66 times less risky than DATAGROUP. It trades about 0.25 of its potential returns per unit of risk. DATAGROUP SE is currently generating about 0.1 per unit of risk. If you would invest  31,125  in Trane Technologies plc on September 4, 2024 and sell it today you would earn a total of  8,105  from holding Trane Technologies plc or generate 26.04% return on investment over 90 days.

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

Trane Technologies plc  vs.  DATAGROUP SE

Trane Technologies plc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Trane Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

DATAGROUP SE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, DATAGROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trane Technologies and DATAGROUP

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

The idea behind Trane Technologies plc and DATAGROUP SE 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.