Correlation Between STORE ELECTRONIC and TT Electronics
Can any of the company-specific risk be diversified away by investing in both STORE ELECTRONIC and TT Electronics 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 STORE ELECTRONIC and TT Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STORE ELECTRONIC and TT Electronics PLC, you can compare the effects of market volatilities on STORE ELECTRONIC and TT Electronics 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 STORE ELECTRONIC with a short position of TT Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of STORE ELECTRONIC and TT Electronics.
Diversification Opportunities for STORE ELECTRONIC and TT Electronics
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between STORE and 7TT is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding STORE ELECTRONIC and TT Electronics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TT Electronics PLC and STORE ELECTRONIC 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 STORE ELECTRONIC are associated (or correlated) with TT Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TT Electronics PLC has no effect on the direction of STORE ELECTRONIC i.e., STORE ELECTRONIC and TT Electronics go up and down completely randomly.
Pair Corralation between STORE ELECTRONIC and TT Electronics
Assuming the 90 days trading horizon STORE ELECTRONIC is expected to generate 1.58 times more return on investment than TT Electronics. However, STORE ELECTRONIC is 1.58 times more volatile than TT Electronics PLC. It trades about 0.04 of its potential returns per unit of risk. TT Electronics PLC is currently generating about -0.01 per unit of risk. If you would invest 12,092 in STORE ELECTRONIC on September 23, 2024 and sell it today you would earn a total of 3,118 from holding STORE ELECTRONIC or generate 25.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STORE ELECTRONIC vs. TT Electronics PLC
Performance |
| Timeline |
| STORE ELECTRONIC |
| TT Electronics PLC |
STORE ELECTRONIC and TT Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STORE ELECTRONIC and TT Electronics
The main advantage of trading using opposite STORE ELECTRONIC and TT Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STORE ELECTRONIC position performs unexpectedly, TT Electronics 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 TT Electronics will offset losses from the drop in TT Electronics' long position.| STORE ELECTRONIC vs. Apple Inc | STORE ELECTRONIC vs. Apple Inc | STORE ELECTRONIC vs. Apple Inc | STORE ELECTRONIC vs. Apple Inc |
| TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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