Correlation Between Transport and TDG Global

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

Diversification Opportunities for Transport and TDG Global

0.54

Correlation Coefficient

Transport  TDG Global

Very weak diversification

The 3 months correlation between Transport and TDG is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and TDG Global Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TDG Global Investment 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 TDG Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TDG Global Investment has no effect on the direction of Transport i.e., Transport and TDG Global go up and down completely randomly.

Pair Corralation between Transport and TDG Global

Assuming the 90 days trading horizon Transport and Industry is expected to under-perform the TDG Global. But the stock apears to be less risky and, when comparing its historical volatility, Transport and Industry is 1.96 times less risky than TDG Global. The stock trades about -0.2 of its potential returns per unit of risk. The TDG Global Investment is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  404,167  in TDG Global Investment on September 15, 2024 and sell it today you would lose (42,167) from holding TDG Global Investment or give up 10.43% of portfolio value over 90 days.

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

Transport and Industry  vs.  TDG Global Investment

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 unfluctuating performance in the last few months, the Stock's fundamental 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.

TDG Global Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Transport and TDG Global

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

The idea behind Transport and Industry and TDG Global Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.