Correlation Between Terminal X and Abra Information
Can any of the company-specific risk be diversified away by investing in both Terminal X and Abra Information 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 Terminal X and Abra Information into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Terminal X Online and Abra Information Technologies, you can compare the effects of market volatilities on Terminal X and Abra Information 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 Terminal X with a short position of Abra Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terminal X and Abra Information.
Diversification Opportunities for Terminal X and Abra Information
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Terminal and Abra is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Terminal X Online and Abra Information Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abra Information Tec and Terminal X 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 Terminal X Online are associated (or correlated) with Abra Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abra Information Tec has no effect on the direction of Terminal X i.e., Terminal X and Abra Information go up and down completely randomly.
Pair Corralation between Terminal X and Abra Information
Assuming the 90 days trading horizon Terminal X Online is expected to generate 0.92 times more return on investment than Abra Information. However, Terminal X Online is 1.08 times less risky than Abra Information. It trades about 0.36 of its potential returns per unit of risk. Abra Information Technologies is currently generating about -0.41 per unit of risk. If you would invest 38,740 in Terminal X Online on September 1, 2024 and sell it today you would earn a total of 4,580 from holding Terminal X Online or generate 11.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Terminal X Online vs. Abra Information Technologies
Performance |
| Timeline |
| Terminal X Online |
| Abra Information Tec |
Terminal X and Abra Information Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Terminal X and Abra Information
The main advantage of trading using opposite Terminal X and Abra Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terminal X position performs unexpectedly, Abra Information 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 Abra Information will offset losses from the drop in Abra Information's long position.The idea behind Terminal X Online and Abra Information Technologies 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.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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