Correlation Between CFG BANK and TGCC SA

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

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

Diversification Opportunities for CFG BANK and TGCC SA

0.86

Correlation Coefficient

CFG BANK  TGCC SA

Very poor diversification

The 3 months correlation between CFG and TGCC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CFG BANK and TGCC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGCC SA and CFG BANK 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 CFG BANK are associated (or correlated) with TGCC SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGCC SA has no effect on the direction of CFG BANK i.e., CFG BANK and TGCC SA go up and down completely randomly.

Pair Corralation between CFG BANK and TGCC SA

Assuming the 90 days trading horizon CFG BANK is expected to generate 1.53 times less return on investment than TGCC SA. But when comparing it to its historical volatility, CFG BANK is 1.14 times less risky than TGCC SA. It trades about 0.16 of its potential returns per unit of risk. TGCC SA is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  37,490  in TGCC SA on September 13, 2024 and sell it today you would earn a total of  10,010  from holding TGCC SA or generate 26.7% return on investment over 90 days.

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

CFG BANK  vs.  TGCC SA

CFG BANK

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CFG BANK are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, CFG BANK displayed solid returns over the last few months and may actually be approaching a breakup point.

TGCC SA

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TGCC SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, TGCC SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CFG BANK and TGCC SA

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

The idea behind CFG BANK and TGCC SA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.