Correlation Between Castro and Terminal X

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

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

Diversification Opportunities for Castro and Terminal X

0.89

Correlation Coefficient

Castro  Terminal X

Very poor diversification

The 3 months correlation between Castro and Terminal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Castro and Terminal X Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terminal X Online and Castro 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 Castro are associated (or correlated) with Terminal X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terminal X Online has no effect on the direction of Castro i.e., Castro and Terminal X go up and down completely randomly.

Pair Corralation between Castro and Terminal X

Assuming the 90 days trading horizon Castro is expected to generate 2.13 times less return on investment than Terminal X. In addition to that, Castro is 1.14 times more volatile than Terminal X Online. It trades about 0.17 of its total potential returns per unit of risk. Terminal X Online is currently generating about 0.42 per unit of volatility. If you would invest  31,500  in Terminal X Online on September 4, 2024 and sell it today you would earn a total of  11,790  from holding Terminal X Online or generate 37.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Castro  vs.  Terminal X Online

Castro

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Castro are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Castro sustained solid returns over the last few months and may actually be approaching a breakup point.

Terminal X Online

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Terminal X Online are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Terminal X sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Castro and Terminal X

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

The idea behind Castro and Terminal X Online 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.