Correlation Between THORNEY TECHS and Cummins
Can any of the company-specific risk be diversified away by investing in both THORNEY TECHS and Cummins 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 THORNEY TECHS and Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THORNEY TECHS LTD and Cummins, you can compare the effects of market volatilities on THORNEY TECHS and Cummins 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 THORNEY TECHS with a short position of Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of THORNEY TECHS and Cummins.
Diversification Opportunities for THORNEY TECHS and Cummins
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between THORNEY and Cummins is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding THORNEY TECHS LTD and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins and THORNEY TECHS 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 THORNEY TECHS LTD are associated (or correlated) with Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of THORNEY TECHS i.e., THORNEY TECHS and Cummins go up and down completely randomly.
Pair Corralation between THORNEY TECHS and Cummins
Assuming the 90 days horizon THORNEY TECHS is expected to generate 1.47 times less return on investment than Cummins. In addition to that, THORNEY TECHS is 3.21 times more volatile than Cummins. It trades about 0.07 of its total potential returns per unit of risk. Cummins is currently generating about 0.34 per unit of volatility. If you would invest 27,005 in Cummins on September 5, 2024 and sell it today you would earn a total of 8,975 from holding Cummins or generate 33.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.46% |
| Values | Daily Returns |
THORNEY TECHS LTD vs. Cummins
Performance |
| Timeline |
| THORNEY TECHS LTD |
| Cummins |
THORNEY TECHS and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with THORNEY TECHS and Cummins
The main advantage of trading using opposite THORNEY TECHS and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THORNEY TECHS position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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