Correlation Between Southern Rubber and Transimex Transportation

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

By analyzing existing cross correlation between Southern Rubber Industry and Transimex Transportation JSC, you can compare the effects of market volatilities on Southern Rubber and Transimex Transportation 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 Southern Rubber with a short position of Transimex Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Rubber and Transimex Transportation.

Diversification Opportunities for Southern Rubber and Transimex Transportation

-0.62

Correlation Coefficient

Southern Rubber  Transimex Transportation

Excellent diversification

The 3 months correlation between Southern and Transimex is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Southern Rubber Industry and Transimex Transportation JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transimex Transportation and Southern Rubber 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 Southern Rubber Industry are associated (or correlated) with Transimex Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transimex Transportation has no effect on the direction of Southern Rubber i.e., Southern Rubber and Transimex Transportation go up and down completely randomly.

Pair Corralation between Southern Rubber and Transimex Transportation

Assuming the 90 days trading horizon Southern Rubber is expected to generate 3.32 times less return on investment than Transimex Transportation. But when comparing it to its historical volatility, Southern Rubber Industry is 1.42 times less risky than Transimex Transportation. It trades about 0.03 of its potential returns per unit of risk. Transimex Transportation JSC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,010,981  in Transimex Transportation JSC on September 28, 2024 and sell it today you would earn a total of  729,019  from holding Transimex Transportation JSC or generate 72.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	78.03%
Values	Daily Returns

Southern Rubber Industry  vs.  Transimex Transportation JSC

Southern Rubber Industry

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Rubber Industry are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Southern Rubber displayed solid returns over the last few months and may actually be approaching a breakup point.

Transimex Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transimex Transportation JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Transimex Transportation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Southern Rubber and Transimex Transportation

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

The idea behind Southern Rubber Industry and Transimex Transportation JSC 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.