Correlation Between Innovative Technology and Transimex Transportation

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

By analyzing existing cross correlation between Innovative Technology Development and Transimex Transportation JSC, you can compare the effects of market volatilities on Innovative Technology and Transimex Transportation 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 Innovative Technology with a short position of Transimex Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Technology and Transimex Transportation.

Diversification Opportunities for Innovative Technology and Transimex Transportation

-0.27

Correlation Coefficient

Innovative Technology  Transimex Transportation

Very good diversification

The 3 months correlation between Innovative and Transimex is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Technology Developm and Transimex Transportation JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transimex Transportation and Innovative Technology 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 Innovative Technology Development are associated (or correlated) with Transimex Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transimex Transportation has no effect on the direction of Innovative Technology i.e., Innovative Technology and Transimex Transportation go up and down completely randomly.

Pair Corralation between Innovative Technology and Transimex Transportation

Assuming the 90 days trading horizon Innovative Technology Development is expected to generate 1.03 times more return on investment than Transimex Transportation. However, Innovative Technology is 1.03 times more volatile than Transimex Transportation JSC. It trades about -0.01 of its potential returns per unit of risk. Transimex Transportation JSC is currently generating about -0.07 per unit of risk. If you would invest  1,330,000  in Innovative Technology Development on September 21, 2024 and sell it today you would lose (25,000) from holding Innovative Technology Development or give up 1.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.18%
Values	Daily Returns

Innovative Technology Developm  vs.  Transimex Transportation JSC

Innovative Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Technology Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Innovative Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Transimex Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transimex Transportation JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Transimex Transportation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Innovative Technology and Transimex Transportation

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

The idea behind Innovative Technology Development and Transimex Transportation JSC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.