Correlation Between 156700BD7 and Timken

Can any of the company-specific risk be diversified away by investing in both 156700BD7 and Timken 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 156700BD7 and Timken into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US156700BD72 and Timken Company, you can compare the effects of market volatilities on 156700BD7 and Timken 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 156700BD7 with a short position of Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of 156700BD7 and Timken.

Diversification Opportunities for 156700BD7 and Timken

-0.34

Correlation Coefficient

156700BD7  Timken

Very good diversification

The 3 months correlation between 156700BD7 and Timken is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding US156700BD72 and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company and 156700BD7 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 US156700BD72 are associated (or correlated) with Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of 156700BD7 i.e., 156700BD7 and Timken go up and down completely randomly.

Pair Corralation between 156700BD7 and Timken

Assuming the 90 days trading horizon US156700BD72 is expected to generate 4.42 times more return on investment than Timken. However, 156700BD7 is 4.42 times more volatile than Timken Company. It trades about 0.06 of its potential returns per unit of risk. Timken Company is currently generating about -0.03 per unit of risk. If you would invest  6,923  in US156700BD72 on September 17, 2024 and sell it today you would lose (48.00) from holding US156700BD72 or give up 0.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.06%
Values	Daily Returns

US156700BD72  vs.  Timken Company

US156700BD72

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in US156700BD72 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 156700BD7 sustained solid returns over the last few months and may actually be approaching a breakup point.

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with 156700BD7 and Timken

The main advantage of trading using opposite 156700BD7 and Timken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 156700BD7 position performs unexpectedly, Timken 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 Timken will offset losses from the drop in Timken's long position.

The idea behind US156700BD72 and Timken Company 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.