Correlation Between Transcontinental and K Bro

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

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

Diversification Opportunities for Transcontinental and K Bro

-0.13

Correlation Coefficient

Transcontinental  K Bro

Good diversification

The 3 months correlation between Transcontinental and KBL is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Transcontinental and K Bro Linen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Bro Linen and Transcontinental 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 Transcontinental are associated (or correlated) with K Bro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Bro Linen has no effect on the direction of Transcontinental i.e., Transcontinental and K Bro go up and down completely randomly.

Pair Corralation between Transcontinental and K Bro

Assuming the 90 days trading horizon Transcontinental is expected to generate 1.26 times more return on investment than K Bro. However, Transcontinental is 1.26 times more volatile than K Bro Linen. It trades about 0.1 of its potential returns per unit of risk. K Bro Linen is currently generating about 0.09 per unit of risk. If you would invest  1,635  in Transcontinental on September 14, 2024 and sell it today you would earn a total of  166.00  from holding Transcontinental or generate 10.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Transcontinental  vs.  K Bro Linen

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.

K Bro Linen

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Transcontinental and K Bro

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

The idea behind Transcontinental and K Bro Linen 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.