Correlation Between Retail Estates and TMT Investments
Can any of the company-specific risk be diversified away by investing in both Retail Estates and TMT Investments 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 Retail Estates and TMT Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retail Estates NV and TMT Investments PLC, you can compare the effects of market volatilities on Retail Estates and TMT Investments 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 Retail Estates with a short position of TMT Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and TMT Investments.
Diversification Opportunities for Retail Estates and TMT Investments
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Retail and TMT is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and TMT Investments PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMT Investments PLC and Retail Estates 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 Retail Estates NV are associated (or correlated) with TMT Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMT Investments PLC has no effect on the direction of Retail Estates i.e., Retail Estates and TMT Investments go up and down completely randomly.
Pair Corralation between Retail Estates and TMT Investments
Assuming the 90 days trading horizon Retail Estates NV is expected to generate 2.85 times more return on investment than TMT Investments. However, Retail Estates is 2.85 times more volatile than TMT Investments PLC. It trades about 0.03 of its potential returns per unit of risk. TMT Investments PLC is currently generating about -0.04 per unit of risk. If you would invest 7,210 in Retail Estates NV on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Retail Estates NV or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Retail Estates NV vs. TMT Investments PLC
Performance |
| Timeline |
| Retail Estates NV |
| TMT Investments PLC |
Retail Estates and TMT Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Retail Estates and TMT Investments
The main advantage of trading using opposite Retail Estates and TMT Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates position performs unexpectedly, TMT Investments 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 TMT Investments will offset losses from the drop in TMT Investments' long position.| Retail Estates vs. Lendinvest PLC | Retail Estates vs. Neometals | Retail Estates vs. Coor Service Management | Retail Estates vs. Albion Technology General |
| TMT Investments vs. Toyota Motor Corp | TMT Investments vs. Lendinvest PLC | TMT Investments vs. Neometals | TMT Investments vs. Coor Service Management |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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