Correlation Between Appen and T M

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

By analyzing existing cross correlation between Appen Limited and T M M, you can compare the effects of market volatilities on Appen and T M 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 Appen with a short position of T M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Appen and T M.

Diversification Opportunities for Appen and T M

0.15

Correlation Coefficient

Appen  T M

Average diversification

The 3 months correlation between Appen and TMMI is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Appen Limited and T M M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T M M and Appen 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 Appen Limited are associated (or correlated) with T M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T M M has no effect on the direction of Appen i.e., Appen and T M go up and down completely randomly.

Pair Corralation between Appen and T M

Assuming the 90 days horizon Appen is expected to generate 3.55 times less return on investment than T M. But when comparing it to its historical volatility, Appen Limited is 3.18 times less risky than T M. It trades about 0.06 of its potential returns per unit of risk. T M M is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.11  in T M M on September 30, 2024 and sell it today you would lose (0.74) from holding T M M or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.47%
Values	Daily Returns

Appen Limited  vs.  T M M

Appen Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Appen Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Appen showed solid returns over the last few months and may actually be approaching a breakup point.

T M M

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T M M are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, T M demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Appen and T M

The main advantage of trading using opposite Appen and T M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Appen position performs unexpectedly, T M 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 T M will offset losses from the drop in T M's long position.

The idea behind Appen Limited and T M M 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.