Correlation Between Truworths International and Rex Trueform

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

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

Diversification Opportunities for Truworths International and Rex Trueform

-0.32

Correlation Coefficient

Truworths International  Rex Trueform

Very good diversification

The 3 months correlation between Truworths and Rex is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Truworths International and Rex Trueform Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rex Trueform Group and Truworths International 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 Truworths International are associated (or correlated) with Rex Trueform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rex Trueform Group has no effect on the direction of Truworths International i.e., Truworths International and Rex Trueform go up and down completely randomly.

Pair Corralation between Truworths International and Rex Trueform

Assuming the 90 days trading horizon Truworths International is expected to generate 1.19 times more return on investment than Rex Trueform. However, Truworths International is 1.19 times more volatile than Rex Trueform Group. It trades about 0.09 of its potential returns per unit of risk. Rex Trueform Group is currently generating about -0.23 per unit of risk. If you would invest  953,100  in Truworths International on September 14, 2024 and sell it today you would earn a total of  98,000  from holding Truworths International or generate 10.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	30.16%
Values	Daily Returns

Truworths International  vs.  Rex Trueform Group

Truworths International

Risk-Adjusted Performance

6 of 100

Modest

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

Rex Trueform Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rex Trueform Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Truworths International and Rex Trueform

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

The idea behind Truworths International and Rex Trueform Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.