Correlation Between Klabin SA and Transocean

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

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

Diversification Opportunities for Klabin SA and Transocean

-0.13

Correlation Coefficient

Klabin SA  Transocean

Good diversification

The 3 months correlation between Klabin and Transocean is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Klabin SA and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Klabin SA 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 Klabin SA 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 Klabin SA i.e., Klabin SA and Transocean go up and down completely randomly.

Pair Corralation between Klabin SA and Transocean

Assuming the 90 days trading horizon Klabin SA is expected to generate 0.43 times more return on investment than Transocean. However, Klabin SA is 2.35 times less risky than Transocean. It trades about 0.1 of its potential returns per unit of risk. Transocean is currently generating about -0.02 per unit of risk. If you would invest  1,674  in Klabin SA on October 3, 2024 and sell it today you would earn a total of  646.00  from holding Klabin SA or generate 38.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.25%
Values	Daily Returns

Klabin SA  vs.  Transocean

Klabin SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Klabin SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Klabin SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Klabin SA and Transocean

The main advantage of trading using opposite Klabin SA and Transocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Klabin SA 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 Klabin SA 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.