Correlation Between Link Reservations and TransGlobal Assets

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

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

Diversification Opportunities for Link Reservations and TransGlobal Assets

0.35

Correlation Coefficient

Link Reservations  TransGlobal Assets

Weak diversification

The 3 months correlation between Link and TransGlobal is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Link Reservations and TransGlobal Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransGlobal Assets and Link Reservations 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 Link Reservations are associated (or correlated) with TransGlobal Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransGlobal Assets has no effect on the direction of Link Reservations i.e., Link Reservations and TransGlobal Assets go up and down completely randomly.

Pair Corralation between Link Reservations and TransGlobal Assets

Given the investment horizon of 90 days Link Reservations is expected to generate 1.37 times more return on investment than TransGlobal Assets. However, Link Reservations is 1.37 times more volatile than TransGlobal Assets. It trades about 0.08 of its potential returns per unit of risk. TransGlobal Assets is currently generating about 0.06 per unit of risk. If you would invest  0.50  in Link Reservations on September 4, 2024 and sell it today you would lose (0.40) from holding Link Reservations or give up 80.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Link Reservations  vs.  TransGlobal Assets

Link Reservations

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Link Reservations are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Link Reservations showed solid returns over the last few months and may actually be approaching a breakup point.

TransGlobal Assets

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TransGlobal Assets are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, TransGlobal Assets demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Link Reservations and TransGlobal Assets

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

The idea behind Link Reservations and TransGlobal Assets 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .