Correlation Between Pepco Group and TLT
Can any of the company-specific risk be diversified away by investing in both Pepco Group 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 Pepco Group and TLT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pepco Group BV and TLT, you can compare the effects of market volatilities on Pepco Group 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 Pepco Group with a short position of TLT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pepco Group and TLT.
Diversification Opportunities for Pepco Group and TLT
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pepco and TLT is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pepco Group BV and TLT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TLT and Pepco Group 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 Pepco Group BV 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 Pepco Group i.e., Pepco Group and TLT go up and down completely randomly.
Pair Corralation between Pepco Group and TLT
Assuming the 90 days trading horizon Pepco Group BV is expected to under-perform the TLT. But the stock apears to be less risky and, when comparing its historical volatility, Pepco Group BV is 3.09 times less risky than TLT. The stock trades about -0.06 of its potential returns per unit of risk. The TLT is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 45.00 in TLT on August 30, 2024 and sell it today you would lose (32.00) from holding TLT or give up 71.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 75.51% |
| Values | Daily Returns |
Pepco Group BV vs. TLT
Performance |
| Timeline |
| Pepco Group BV |
| TLT |
Pepco Group and TLT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pepco Group and TLT
The main advantage of trading using opposite Pepco Group and TLT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pepco Group 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.| Pepco Group vs. Carlson Investments SA | Pepco Group vs. Tower Investments SA | Pepco Group vs. Mercator Medical SA | Pepco Group vs. Bank Millennium SA |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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