Correlation Between CTS and TE Connectivity
Can any of the company-specific risk be diversified away by investing in both CTS and TE Connectivity 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 CTS and TE Connectivity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CTS Corporation and TE Connectivity, you can compare the effects of market volatilities on CTS and TE Connectivity 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 CTS with a short position of TE Connectivity. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTS and TE Connectivity.
Diversification Opportunities for CTS and TE Connectivity
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CTS and TEL is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CTS Corp. and TE Connectivity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TE Connectivity and CTS 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 CTS Corporation are associated (or correlated) with TE Connectivity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TE Connectivity has no effect on the direction of CTS i.e., CTS and TE Connectivity go up and down completely randomly.
Pair Corralation between CTS and TE Connectivity
Considering the 90-day investment horizon CTS Corporation is expected to generate 2.1 times more return on investment than TE Connectivity. However, CTS is 2.1 times more volatile than TE Connectivity. It trades about 0.21 of its potential returns per unit of risk. TE Connectivity is currently generating about 0.06 per unit of risk. If you would invest 4,854 in CTS Corporation on August 28, 2024 and sell it today you would earn a total of 693.00 from holding CTS Corporation or generate 14.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTS Corp. vs. TE Connectivity
Performance |
| Timeline |
| CTS Corporation |
| TE Connectivity |
CTS and TE Connectivity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTS and TE Connectivity
The main advantage of trading using opposite CTS and TE Connectivity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTS position performs unexpectedly, TE Connectivity 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 TE Connectivity will offset losses from the drop in TE Connectivity's long position.The idea behind CTS Corporation and TE Connectivity 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.| TE Connectivity vs. Littelfuse | TE Connectivity vs. Fabrinet | TE Connectivity vs. Jabil Circuit | TE Connectivity vs. Sanmina |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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