Correlation Between Cotec Construction and Transport

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

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

Diversification Opportunities for Cotec Construction and Transport

-0.51

Correlation Coefficient

Cotec Construction  Transport

Excellent diversification

The 3 months correlation between Cotec and Transport is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cotec Construction JSC and Transport and Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport and Industry and Cotec Construction 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 Cotec Construction JSC are associated (or correlated) with Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport and Industry has no effect on the direction of Cotec Construction i.e., Cotec Construction and Transport go up and down completely randomly.

Pair Corralation between Cotec Construction and Transport

Assuming the 90 days trading horizon Cotec Construction JSC is expected to generate 1.12 times more return on investment than Transport. However, Cotec Construction is 1.12 times more volatile than Transport and Industry. It trades about 0.03 of its potential returns per unit of risk. Transport and Industry is currently generating about -0.2 per unit of risk. If you would invest  6,780,000  in Cotec Construction JSC on October 8, 2024 and sell it today you would earn a total of  40,000  from holding Cotec Construction JSC or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cotec Construction JSC  vs.  Transport and Industry

Cotec Construction JSC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cotec Construction JSC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cotec Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport and Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cotec Construction and Transport

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

The idea behind Cotec Construction JSC and Transport and Industry 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.