Correlation Between Finning International and Transcontinental

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

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

Diversification Opportunities for Finning International and Transcontinental

0.27

Correlation Coefficient

Finning International  Transcontinental

Modest diversification

The 3 months correlation between Finning and Transcontinental is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Finning International and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental and Finning International 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 Finning International 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 Finning International i.e., Finning International and Transcontinental go up and down completely randomly.

Pair Corralation between Finning International and Transcontinental

Assuming the 90 days trading horizon Finning International is expected to under-perform the Transcontinental. In addition to that, Finning International is 1.19 times more volatile than Transcontinental. It trades about -0.06 of its total potential returns per unit of risk. Transcontinental is currently generating about 0.09 per unit of volatility. If you would invest  1,660  in Transcontinental on September 22, 2024 and sell it today you would earn a total of  140.00  from holding Transcontinental or generate 8.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Finning International  vs.  Transcontinental

Finning International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finning International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Transcontinental

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Transcontinental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Finning International and Transcontinental

The main advantage of trading using opposite Finning International and Transcontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finning International 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 Finning International 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.