Correlation Between Pentagon I and Transat AT

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

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

Diversification Opportunities for Pentagon I and Transat AT

-0.64

Correlation Coefficient

Pentagon I  Transat AT

Excellent diversification

The 3 months correlation between Pentagon and Transat is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pentagon I Capital and Transat AT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transat AT and Pentagon I 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 Pentagon I Capital are associated (or correlated) with Transat AT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transat AT has no effect on the direction of Pentagon I i.e., Pentagon I and Transat AT go up and down completely randomly.

Pair Corralation between Pentagon I and Transat AT

If you would invest  180.00  in Transat AT on October 22, 2024 and sell it today you would earn a total of  5.00  from holding Transat AT or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Pentagon I Capital  vs.  Transat AT

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Transat AT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transat AT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Transat AT is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pentagon I and Transat AT

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

The idea behind Pentagon I Capital and Transat AT 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.