Correlation Between Investec and Trematon Capital

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

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

Diversification Opportunities for Investec and Trematon Capital

0.23

Correlation Coefficient

Investec  Trematon Capital

Modest diversification

The 3 months correlation between Investec and Trematon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Investec and Trematon Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trematon Capital Inv and Investec 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 Investec are associated (or correlated) with Trematon Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trematon Capital Inv has no effect on the direction of Investec i.e., Investec and Trematon Capital go up and down completely randomly.

Pair Corralation between Investec and Trematon Capital

Assuming the 90 days trading horizon Investec is expected to generate 1.09 times less return on investment than Trematon Capital. But when comparing it to its historical volatility, Investec is 3.27 times less risky than Trematon Capital. It trades about 0.05 of its potential returns per unit of risk. Trematon Capital Investments is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  28,000  in Trematon Capital Investments on October 4, 2024 and sell it today you would lose (2,500) from holding Trematon Capital Investments or give up 8.93% of portfolio value over 90 days.

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

Investec  vs.  Trematon Capital Investments

Investec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investec is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Trematon Capital Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trematon Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Trematon Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Investec and Trematon Capital

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

The idea behind Investec and Trematon Capital Investments 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..