Correlation Between ABC TRANSPORT and LIVINGTRUST MORTGAGE

Can any of the company-specific risk be diversified away by investing in both ABC TRANSPORT and LIVINGTRUST MORTGAGE 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 ABC TRANSPORT and LIVINGTRUST MORTGAGE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ABC TRANSPORT PLC and LIVINGTRUST MORTGAGE BANK, you can compare the effects of market volatilities on ABC TRANSPORT and LIVINGTRUST MORTGAGE 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 ABC TRANSPORT with a short position of LIVINGTRUST MORTGAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABC TRANSPORT and LIVINGTRUST MORTGAGE.

Diversification Opportunities for ABC TRANSPORT and LIVINGTRUST MORTGAGE

-0.39

Correlation Coefficient

ABC TRANSPORT  LIVINGTRUST MORTGAGE

Very good diversification

The 3 months correlation between ABC and LIVINGTRUST is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding ABC TRANSPORT PLC and LIVINGTRUST MORTGAGE BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIVINGTRUST MORTGAGE BANK and ABC TRANSPORT 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 ABC TRANSPORT PLC are associated (or correlated) with LIVINGTRUST MORTGAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIVINGTRUST MORTGAGE BANK has no effect on the direction of ABC TRANSPORT i.e., ABC TRANSPORT and LIVINGTRUST MORTGAGE go up and down completely randomly.

Pair Corralation between ABC TRANSPORT and LIVINGTRUST MORTGAGE

Assuming the 90 days trading horizon ABC TRANSPORT PLC is expected to under-perform the LIVINGTRUST MORTGAGE. In addition to that, ABC TRANSPORT is 1.62 times more volatile than LIVINGTRUST MORTGAGE BANK. It trades about -0.05 of its total potential returns per unit of risk. LIVINGTRUST MORTGAGE BANK is currently generating about 0.3 per unit of volatility. If you would invest  300.00  in LIVINGTRUST MORTGAGE BANK on October 25, 2024 and sell it today you would earn a total of  181.00  from holding LIVINGTRUST MORTGAGE BANK or generate 60.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

ABC TRANSPORT PLC  vs.  LIVINGTRUST MORTGAGE BANK

ABC TRANSPORT PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABC TRANSPORT PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

LIVINGTRUST MORTGAGE BANK

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LIVINGTRUST MORTGAGE BANK are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, LIVINGTRUST MORTGAGE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABC TRANSPORT and LIVINGTRUST MORTGAGE

The main advantage of trading using opposite ABC TRANSPORT and LIVINGTRUST MORTGAGE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC TRANSPORT position performs unexpectedly, LIVINGTRUST MORTGAGE 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 LIVINGTRUST MORTGAGE will offset losses from the drop in LIVINGTRUST MORTGAGE's long position.

The idea behind ABC TRANSPORT PLC and LIVINGTRUST MORTGAGE BANK 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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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.