Correlation Between Global Electrical and Transport
Can any of the company-specific risk be diversified away by investing in both Global Electrical and Transport 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 Global Electrical and Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Electrical Technology and Transport and Industry, you can compare the effects of market volatilities on Global Electrical and Transport 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 Global Electrical with a short position of Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Electrical and Transport.
Diversification Opportunities for Global Electrical and Transport
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Transport is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Global Electrical Technology and Transport and Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport and Industry and Global Electrical 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 Global Electrical Technology are associated (or correlated) with Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport and Industry has no effect on the direction of Global Electrical i.e., Global Electrical and Transport go up and down completely randomly.
Pair Corralation between Global Electrical and Transport
Assuming the 90 days trading horizon Global Electrical Technology is expected to generate 3.1 times more return on investment than Transport. However, Global Electrical is 3.1 times more volatile than Transport and Industry. It trades about -0.05 of its potential returns per unit of risk. Transport and Industry is currently generating about -0.21 per unit of risk. If you would invest 2,800,000 in Global Electrical Technology on September 2, 2024 and sell it today you would lose (150,000) from holding Global Electrical Technology or give up 5.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 54.55% |
| Values | Daily Returns |
Global Electrical Technology vs. Transport and Industry
Performance |
| Timeline |
| Global Electrical |
| Transport and Industry |
Global Electrical and Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Electrical and Transport
The main advantage of trading using opposite Global Electrical and Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Electrical position performs unexpectedly, Transport 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 Transport will offset losses from the drop in Transport's long position.| Global Electrical vs. DOMESCO Medical Import | Global Electrical vs. Binh Duong Trade | Global Electrical vs. Petrovietnam Technical Services | Global Electrical vs. VTC Telecommunications JSC |
| Transport vs. Tienlen Steel Corp | Transport vs. PVI Reinsurance Corp | Transport vs. Vietnam National Reinsurance | Transport vs. CEO Group JSC |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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