Correlation Between TLT and Text SA
Can any of the company-specific risk be diversified away by investing in both TLT and Text SA 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 Text SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TLT and Text SA, you can compare the effects of market volatilities on TLT and Text SA 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 Text SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of TLT and Text SA.
Diversification Opportunities for TLT and Text SA
Very good diversification
The 3 months correlation between TLT and Text is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding TLT and Text SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Text 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 Text SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Text SA has no effect on the direction of TLT i.e., TLT and Text SA go up and down completely randomly.
Pair Corralation between TLT and Text SA
Assuming the 90 days trading horizon TLT is expected to under-perform the Text SA. In addition to that, TLT is 4.04 times more volatile than Text SA. It trades about -0.14 of its total potential returns per unit of risk. Text SA is currently generating about -0.24 per unit of volatility. If you would invest 5,920 in Text SA on August 26, 2024 and sell it today you would lose (510.00) from holding Text SA or give up 8.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
TLT vs. Text SA
Performance |
| Timeline |
| TLT |
| Text SA |
TLT and Text SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TLT and Text SA
The main advantage of trading using opposite TLT and Text SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TLT position performs unexpectedly, Text SA 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 Text SA will offset losses from the drop in Text SA's long position.The idea behind TLT and Text 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.| Text SA vs. Banco Santander SA | Text SA vs. UniCredit SpA | Text SA vs. CEZ as | Text SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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