Correlation Between TRV Rubber and RS Public

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

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

Diversification Opportunities for TRV Rubber and RS Public

-0.25

Correlation Coefficient

TRV Rubber  RS Public

Very good diversification

The 3 months correlation between TRV and RS-R is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding TRV Rubber Products and RS Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RS Public and TRV Rubber 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 TRV Rubber Products are associated (or correlated) with RS Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RS Public has no effect on the direction of TRV Rubber i.e., TRV Rubber and RS Public go up and down completely randomly.

Pair Corralation between TRV Rubber and RS Public

Assuming the 90 days trading horizon TRV Rubber is expected to generate 31.93 times less return on investment than RS Public. But when comparing it to its historical volatility, TRV Rubber Products is 28.55 times less risky than RS Public. It trades about 0.1 of its potential returns per unit of risk. RS Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  720.00  in RS Public on September 12, 2024 and sell it today you would lose (135.00) from holding RS Public or give up 18.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

TRV Rubber Products  vs.  RS Public

TRV Rubber Products

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRV Rubber Products are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, TRV Rubber disclosed solid returns over the last few months and may actually be approaching a breakup point.

RS Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RS Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, RS Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRV Rubber and RS Public

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

The idea behind TRV Rubber Products and RS Public 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 Commodity Directory module to find actively traded commodities issued by global exchanges.