Correlation Between Safetech Innovations and Teraplast Bist
Can any of the company-specific risk be diversified away by investing in both Safetech Innovations and Teraplast Bist 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 Safetech Innovations and Teraplast Bist into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Safetech Innovations SA and Teraplast Bist, you can compare the effects of market volatilities on Safetech Innovations and Teraplast Bist 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 Safetech Innovations with a short position of Teraplast Bist. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safetech Innovations and Teraplast Bist.
Diversification Opportunities for Safetech Innovations and Teraplast Bist
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Safetech and Teraplast is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Safetech Innovations SA and Teraplast Bist in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teraplast Bist and Safetech Innovations 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 Safetech Innovations SA are associated (or correlated) with Teraplast Bist. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teraplast Bist has no effect on the direction of Safetech Innovations i.e., Safetech Innovations and Teraplast Bist go up and down completely randomly.
Pair Corralation between Safetech Innovations and Teraplast Bist
Assuming the 90 days trading horizon Safetech Innovations is expected to generate 2.12 times less return on investment than Teraplast Bist. But when comparing it to its historical volatility, Safetech Innovations SA is 1.46 times less risky than Teraplast Bist. It trades about 0.0 of its potential returns per unit of risk. Teraplast Bist is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 42.00 in Teraplast Bist on November 27, 2024 and sell it today you would earn a total of 0.00 from holding Teraplast Bist or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Safetech Innovations SA vs. Teraplast Bist
Performance |
| Timeline |
| Safetech Innovations |
| Teraplast Bist |
Safetech Innovations and Teraplast Bist Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safetech Innovations and Teraplast Bist
The main advantage of trading using opposite Safetech Innovations and Teraplast Bist positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safetech Innovations position performs unexpectedly, Teraplast Bist 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 Teraplast Bist will offset losses from the drop in Teraplast Bist's long position.The idea behind Safetech Innovations SA and Teraplast Bist 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.
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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