Correlation Between Trimble and Equitech International

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

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

Diversification Opportunities for Trimble and Equitech International

-0.57

Correlation Coefficient

Trimble  Equitech International

Excellent diversification

The 3 months correlation between Trimble and Equitech is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and Equitech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitech International and Trimble 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 Trimble are associated (or correlated) with Equitech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitech International has no effect on the direction of Trimble i.e., Trimble and Equitech International go up and down completely randomly.

Pair Corralation between Trimble and Equitech International

Given the investment horizon of 90 days Trimble is expected to generate 0.41 times more return on investment than Equitech International. However, Trimble is 2.42 times less risky than Equitech International. It trades about 0.16 of its potential returns per unit of risk. Equitech International is currently generating about 0.03 per unit of risk. If you would invest  5,669  in Trimble on August 30, 2024 and sell it today you would earn a total of  1,574  from holding Trimble or generate 27.77% return on investment over 90 days.

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

Trimble  vs.  Equitech International

Trimble

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal primary indicators, Trimble sustained solid returns over the last few months and may actually be approaching a breakup point.

Equitech International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equitech International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Equitech International may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Trimble and Equitech International

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

The idea behind Trimble and Equitech International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.