Correlation Between Mena Transport and Regional Container

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

By analyzing existing cross correlation between Mena Transport Public and Regional Container Lines, you can compare the effects of market volatilities on Mena Transport and Regional Container 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 Mena Transport with a short position of Regional Container. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mena Transport and Regional Container.

Diversification Opportunities for Mena Transport and Regional Container

-0.41

Correlation Coefficient

Mena Transport  Regional Container

Very good diversification

The 3 months correlation between Mena and Regional is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Mena Transport Public and Regional Container Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Container Lines and Mena Transport 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 Mena Transport Public are associated (or correlated) with Regional Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Container Lines has no effect on the direction of Mena Transport i.e., Mena Transport and Regional Container go up and down completely randomly.

Pair Corralation between Mena Transport and Regional Container

Assuming the 90 days trading horizon Mena Transport Public is expected to under-perform the Regional Container. In addition to that, Mena Transport is 1.35 times more volatile than Regional Container Lines. It trades about -0.29 of its total potential returns per unit of risk. Regional Container Lines is currently generating about -0.04 per unit of volatility. If you would invest  2,875  in Regional Container Lines on October 7, 2024 and sell it today you would lose (25.00) from holding Regional Container Lines or give up 0.87% of portfolio value over 90 days.

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

Mena Transport Public  vs.  Regional Container Lines

Mena Transport Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mena Transport Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Mena Transport is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Regional Container Lines

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Regional Container sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mena Transport and Regional Container

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

The idea behind Mena Transport Public and Regional Container Lines 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.