Correlation Between Transport International and TT Electronics

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

By analyzing existing cross correlation between Transport International Holdings and TT Electronics PLC, you can compare the effects of market volatilities on Transport International and TT Electronics 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 Transport International with a short position of TT Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport International and TT Electronics.

Diversification Opportunities for Transport International and TT Electronics

-0.23

Correlation Coefficient

Transport International  TT Electronics

Very good diversification

The 3 months correlation between Transport and 7TT is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and TT Electronics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TT Electronics PLC and Transport International 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 Transport International Holdings are associated (or correlated) with TT Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TT Electronics PLC has no effect on the direction of Transport International i.e., Transport International and TT Electronics go up and down completely randomly.

Pair Corralation between Transport International and TT Electronics

Assuming the 90 days horizon Transport International Holdings is expected to generate 0.54 times more return on investment than TT Electronics. However, Transport International Holdings is 1.85 times less risky than TT Electronics. It trades about 0.01 of its potential returns per unit of risk. TT Electronics PLC is currently generating about -0.28 per unit of risk. If you would invest  96.00  in Transport International Holdings on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Transport International Holdings or generate 0.0% return on investment over 90 days.

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

Transport International Holdin  vs.  TT Electronics PLC

Transport International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TT Electronics PLC

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days TT Electronics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, TT Electronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transport International and TT Electronics

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

The idea behind Transport International Holdings and TT Electronics PLC 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.