Correlation Between Gap, and Transocean

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

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

Diversification Opportunities for Gap, and Transocean

0.71

Correlation Coefficient

Gap,  Transocean

Poor diversification

The 3 months correlation between Gap, and Transocean is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Gap, 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 The Gap, are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Gap, i.e., Gap, and Transocean go up and down completely randomly.

Pair Corralation between Gap, and Transocean

Considering the 90-day investment horizon The Gap, is expected to generate 1.08 times more return on investment than Transocean. However, Gap, is 1.08 times more volatile than Transocean. It trades about -0.03 of its potential returns per unit of risk. Transocean is currently generating about -0.05 per unit of risk. If you would invest  2,440  in The Gap, on December 25, 2024 and sell it today you would lose (256.00) from holding The Gap, or give up 10.49% of portfolio value over 90 days.

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

The Gap,  vs.  Transocean

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Transocean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gap, and Transocean

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

The idea behind The Gap, and Transocean 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.