Correlation Between Two Roads and LeaderSharesTM AlphaFactor

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

By analyzing existing cross correlation between Two Roads Shared and LeaderSharesTM AlphaFactor Core, you can compare the effects of market volatilities on Two Roads and LeaderSharesTM AlphaFactor 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 Two Roads with a short position of LeaderSharesTM AlphaFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Roads and LeaderSharesTM AlphaFactor.

Diversification Opportunities for Two Roads and LeaderSharesTM AlphaFactor

0.9

Correlation Coefficient

Two Roads  LeaderSharesTM AlphaFactor

Almost no diversification

The 3 months correlation between Two and LeaderSharesTM is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Two Roads Shared and LeaderSharesTM AlphaFactor Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LeaderSharesTM AlphaFactor and Two Roads 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 Two Roads Shared are associated (or correlated) with LeaderSharesTM AlphaFactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LeaderSharesTM AlphaFactor has no effect on the direction of Two Roads i.e., Two Roads and LeaderSharesTM AlphaFactor go up and down completely randomly.

Pair Corralation between Two Roads and LeaderSharesTM AlphaFactor

Given the investment horizon of 90 days Two Roads Shared is expected to generate 0.92 times more return on investment than LeaderSharesTM AlphaFactor. However, Two Roads Shared is 1.08 times less risky than LeaderSharesTM AlphaFactor. It trades about -0.01 of its potential returns per unit of risk. LeaderSharesTM AlphaFactor Core is currently generating about -0.05 per unit of risk. If you would invest  4,012  in Two Roads Shared on December 30, 2024 and sell it today you would lose (33.00) from holding Two Roads Shared or give up 0.82% of portfolio value over 90 days.

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

Two Roads Shared  vs.  LeaderSharesTM AlphaFactor Cor

Two Roads Shared

Risk-Adjusted Performance

Very Weak

Over the last 90 days Two Roads Shared has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Two Roads is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

LeaderSharesTM AlphaFactor

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Two Roads and LeaderSharesTM AlphaFactor

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

The idea behind Two Roads Shared and LeaderSharesTM AlphaFactor Core 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.