Correlation Between TFS FINANCIAL and Gaztransport Technigaz

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

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

Diversification Opportunities for TFS FINANCIAL and Gaztransport Technigaz

0.84

Correlation Coefficient

TFS FINANCIAL  Gaztransport Technigaz

Very poor diversification

The 3 months correlation between TFS and Gaztransport is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and Gaztransport Technigaz SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport Technigaz and TFS FINANCIAL 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 TFS FINANCIAL are associated (or correlated) with Gaztransport Technigaz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport Technigaz has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and Gaztransport Technigaz go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and Gaztransport Technigaz

Assuming the 90 days trading horizon TFS FINANCIAL is expected to under-perform the Gaztransport Technigaz. But the stock apears to be less risky and, when comparing its historical volatility, TFS FINANCIAL is 1.2 times less risky than Gaztransport Technigaz. The stock trades about -0.1 of its potential returns per unit of risk. The Gaztransport Technigaz SA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  13,522  in Gaztransport Technigaz SA on September 19, 2024 and sell it today you would lose (352.00) from holding Gaztransport Technigaz SA or give up 2.6% of portfolio value over 90 days.

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

TFS FINANCIAL  vs.  Gaztransport Technigaz SA

TFS FINANCIAL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TFS FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gaztransport Technigaz

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport Technigaz SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gaztransport Technigaz is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TFS FINANCIAL and Gaztransport Technigaz

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

The idea behind TFS FINANCIAL and Gaztransport Technigaz SA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.