Correlation Between Jefferies Financial and Transocean

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

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

Diversification Opportunities for Jefferies Financial and Transocean

-0.04

Correlation Coefficient

Jefferies Financial  Transocean

Good diversification

The 3 months correlation between Jefferies and Transocean is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Jefferies Financial Group and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Jefferies Financial 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 Jefferies Financial Group 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 Jefferies Financial i.e., Jefferies Financial and Transocean go up and down completely randomly.

Pair Corralation between Jefferies Financial and Transocean

Assuming the 90 days trading horizon Jefferies Financial Group is expected to under-perform the Transocean. But the stock apears to be less risky and, when comparing its historical volatility, Jefferies Financial Group is 1.71 times less risky than Transocean. The stock trades about -0.04 of its potential returns per unit of risk. The Transocean is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,248  in Transocean on October 22, 2024 and sell it today you would earn a total of  192.00  from holding Transocean or generate 8.54% return on investment over 90 days.

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

Jefferies Financial Group  vs.  Transocean

Jefferies Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jefferies Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Jefferies Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Transocean

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transocean are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Transocean is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jefferies Financial and Transocean

The main advantage of trading using opposite Jefferies Financial and Transocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jefferies Financial 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 Jefferies Financial Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.