Correlation Between TLT and PCF Group
Can any of the company-specific risk be diversified away by investing in both TLT and PCF Group 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 TLT and PCF Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TLT and PCF Group SA, you can compare the effects of market volatilities on TLT and PCF Group 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 TLT with a short position of PCF Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of TLT and PCF Group.
Diversification Opportunities for TLT and PCF Group
Very good diversification
The 3 months correlation between TLT and PCF is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding TLT and PCF Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCF Group SA and TLT 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 TLT are associated (or correlated) with PCF Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCF Group SA has no effect on the direction of TLT i.e., TLT and PCF Group go up and down completely randomly.
Pair Corralation between TLT and PCF Group
Assuming the 90 days trading horizon TLT is expected to generate 3.73 times more return on investment than PCF Group. However, TLT is 3.73 times more volatile than PCF Group SA. It trades about 0.04 of its potential returns per unit of risk. PCF Group SA is currently generating about -0.24 per unit of risk. If you would invest 14.00 in TLT on August 26, 2024 and sell it today you would earn a total of 0.00 from holding TLT or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 84.13% |
| Values | Daily Returns |
TLT vs. PCF Group SA
Performance |
| Timeline |
| TLT |
| PCF Group SA |
TLT and PCF Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TLT and PCF Group
The main advantage of trading using opposite TLT and PCF Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TLT position performs unexpectedly, PCF Group 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 PCF Group will offset losses from the drop in PCF Group's long position.The idea behind TLT and PCF Group SA 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.| PCF Group vs. Banco Santander SA | PCF Group vs. UniCredit SpA | PCF Group vs. CEZ as | PCF Group vs. Polski Koncern Naftowy |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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