Correlation Between Dexterra and Transcontinental

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

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

Diversification Opportunities for Dexterra and Transcontinental

-0.08

Correlation Coefficient

Dexterra  Transcontinental

Good diversification

The 3 months correlation between Dexterra and Transcontinental is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dexterra Group and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental and Dexterra 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 Dexterra Group are associated (or correlated) with Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of Dexterra i.e., Dexterra and Transcontinental go up and down completely randomly.

Pair Corralation between Dexterra and Transcontinental

Assuming the 90 days trading horizon Dexterra is expected to generate 1.59 times less return on investment than Transcontinental. But when comparing it to its historical volatility, Dexterra Group is 2.65 times less risky than Transcontinental. It trades about 0.07 of its potential returns per unit of risk. Transcontinental is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,325  in Transcontinental on September 14, 2024 and sell it today you would earn a total of  476.00  from holding Transcontinental or generate 35.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.71%
Values	Daily Returns

Dexterra Group  vs.  Transcontinental

Dexterra Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dexterra Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dexterra displayed solid returns over the last few months and may actually be approaching a breakup point.

Transcontinental

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Transcontinental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dexterra and Transcontinental

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

The idea behind Dexterra Group and Transcontinental 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.