Correlation Between Balticon and TLT

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Can any of the company-specific risk be diversified away by investing in both Balticon and TLT 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 Balticon and TLT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balticon and TLT, you can compare the effects of market volatilities on Balticon and TLT 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 Balticon with a short position of TLT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balticon and TLT.

Diversification Opportunities for Balticon and TLT

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Balticon and TLT is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Balticon and TLT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TLT and Balticon 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 Balticon are associated (or correlated) with TLT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TLT has no effect on the direction of Balticon i.e., Balticon and TLT go up and down completely randomly.

Pair Corralation between Balticon and TLT

Assuming the 90 days trading horizon Balticon is expected to generate 0.85 times more return on investment than TLT. However, Balticon is 1.18 times less risky than TLT. It trades about 0.31 of its potential returns per unit of risk. TLT is currently generating about 0.03 per unit of risk. If you would invest  1,100  in Balticon on August 30, 2024 and sell it today you would earn a total of  240.00  from holding Balticon or generate 21.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy60.0%
ValuesDaily Returns

Balticon  vs.  TLT

 Performance 
       Timeline  
Balticon 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Balticon are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Balticon reported solid returns over the last few months and may actually be approaching a breakup point.
TLT 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in TLT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, TLT reported solid returns over the last few months and may actually be approaching a breakup point.

Balticon and TLT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Balticon and TLT

The main advantage of trading using opposite Balticon and TLT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balticon position performs unexpectedly, TLT 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 TLT will offset losses from the drop in TLT's long position.
The idea behind Balticon and TLT 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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