Correlation Between Trane Technologies and Technos SA

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

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

Diversification Opportunities for Trane Technologies and Technos SA

0.14

Correlation Coefficient

Trane Technologies  Technos SA

Average diversification

The 3 months correlation between Trane and Technos is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Technos SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technos SA and Trane Technologies 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 Trane Technologies plc are associated (or correlated) with Technos SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technos SA has no effect on the direction of Trane Technologies i.e., Trane Technologies and Technos SA go up and down completely randomly.

Pair Corralation between Trane Technologies and Technos SA

Assuming the 90 days trading horizon Trane Technologies plc is expected to generate 0.96 times more return on investment than Technos SA. However, Trane Technologies plc is 1.05 times less risky than Technos SA. It trades about 0.12 of its potential returns per unit of risk. Technos SA is currently generating about -0.01 per unit of risk. If you would invest  96,622  in Trane Technologies plc on October 23, 2024 and sell it today you would earn a total of  21,114  from holding Trane Technologies plc or generate 21.85% return on investment over 90 days.

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

Trane Technologies plc  vs.  Technos SA

Trane Technologies plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trane Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Technos SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Technos SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Technos SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Trane Technologies and Technos SA

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

The idea behind Trane Technologies plc and Technos 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.