Correlation Between CTT - and ADT
Can any of the company-specific risk be diversified away by investing in both CTT - and ADT 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 CTT - and ADT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CTT Correios and ADT Inc, you can compare the effects of market volatilities on CTT - and ADT 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 CTT - with a short position of ADT. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTT - and ADT.
Diversification Opportunities for CTT - and ADT
Significant diversification
The 3 months correlation between CTT and ADT is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding CTT Correios and ADT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADT Inc and CTT - 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 CTT Correios are associated (or correlated) with ADT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADT Inc has no effect on the direction of CTT - i.e., CTT - and ADT go up and down completely randomly.
Pair Corralation between CTT - and ADT
Assuming the 90 days horizon CTT Correios is expected to generate 0.66 times more return on investment than ADT. However, CTT Correios is 1.52 times less risky than ADT. It trades about 0.06 of its potential returns per unit of risk. ADT Inc is currently generating about 0.01 per unit of risk. If you would invest 328.00 in CTT Correios on October 16, 2024 and sell it today you would earn a total of 198.00 from holding CTT Correios or generate 60.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTT Correios vs. ADT Inc
Performance |
| Timeline |
| CTT Correios |
| ADT Inc |
CTT - and ADT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTT - and ADT
The main advantage of trading using opposite CTT - and ADT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTT - position performs unexpectedly, ADT 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 ADT will offset losses from the drop in ADT's long position.The idea behind CTT Correios and ADT Inc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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