Correlation Between Mattel and Transocean

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

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

Diversification Opportunities for Mattel and Transocean

0.52

Correlation Coefficient

Mattel  Transocean

Very weak diversification

The 3 months correlation between Mattel and Transocean is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Mattel 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 Mattel Inc 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 Mattel i.e., Mattel and Transocean go up and down completely randomly.

Pair Corralation between Mattel and Transocean

Considering the 90-day investment horizon Mattel Inc is expected to generate 0.8 times more return on investment than Transocean. However, Mattel Inc is 1.25 times less risky than Transocean. It trades about -0.16 of its potential returns per unit of risk. Transocean is currently generating about -0.35 per unit of risk. If you would invest  1,880  in Mattel Inc on October 4, 2024 and sell it today you would lose (107.00) from holding Mattel Inc or give up 5.69% of portfolio value over 90 days.

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

Mattel Inc  vs.  Transocean

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Mattel and Transocean

The main advantage of trading using opposite Mattel and Transocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mattel 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 Mattel Inc 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.