Correlation Between Transport and CEO Group

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

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

Diversification Opportunities for Transport and CEO Group

0.85

Correlation Coefficient

Transport  CEO Group

Very poor diversification

The 3 months correlation between Transport and CEO is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and CEO Group JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEO Group JSC and Transport 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 Transport and Industry are associated (or correlated) with CEO Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEO Group JSC has no effect on the direction of Transport i.e., Transport and CEO Group go up and down completely randomly.

Pair Corralation between Transport and CEO Group

Assuming the 90 days trading horizon Transport and Industry is expected to under-perform the CEO Group. In addition to that, Transport is 2.1 times more volatile than CEO Group JSC. It trades about -0.1 of its total potential returns per unit of risk. CEO Group JSC is currently generating about 0.01 per unit of volatility. If you would invest  1,374,294  in CEO Group JSC on September 29, 2024 and sell it today you would lose (14,294) from holding CEO Group JSC or give up 1.04% of portfolio value over 90 days.

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

Transport and Industry  vs.  CEO Group JSC

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

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

CEO Group JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEO Group JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Transport and CEO Group

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

The idea behind Transport and Industry and CEO Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.