Correlation Between Trane Technologies and Compagnie

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

By analyzing existing cross correlation between Trane Technologies plc and Compagnie de Saint Gobain, you can compare the effects of market volatilities on Trane Technologies and Compagnie 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 Trane Technologies with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and Compagnie.

Diversification Opportunities for Trane Technologies and Compagnie

0.78

Correlation Coefficient

Trane Technologies  Compagnie

Poor diversification

The 3 months correlation between Trane and Compagnie is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and Trane Technologies 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 Trane Technologies plc are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Trane Technologies i.e., Trane Technologies and Compagnie go up and down completely randomly.

Pair Corralation between Trane Technologies and Compagnie

Allowing for the 90-day total investment horizon Trane Technologies plc is expected to generate 0.9 times more return on investment than Compagnie. However, Trane Technologies plc is 1.11 times less risky than Compagnie. It trades about 0.12 of its potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.08 per unit of risk. If you would invest  17,214  in Trane Technologies plc on September 3, 2024 and sell it today you would earn a total of  24,408  from holding Trane Technologies plc or generate 141.79% return on investment over 90 days.

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

Trane Technologies plc  vs.  Compagnie de Saint Gobain

Trane Technologies plc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Trane Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Compagnie de Saint

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Trane Technologies and Compagnie

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

The idea behind Trane Technologies plc and Compagnie de Saint Gobain 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.