Correlation Between Roper Technologies, and Trane Technologies

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

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

Diversification Opportunities for Roper Technologies, and Trane Technologies

0.57

Correlation Coefficient

Roper Technologies,  Trane Technologies

Very weak diversification

The 3 months correlation between Roper and Trane is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Roper Technologies, and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc and Roper Technologies, 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 Roper Technologies, are associated (or correlated) with Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Roper Technologies, i.e., Roper Technologies, and Trane Technologies go up and down completely randomly.

Pair Corralation between Roper Technologies, and Trane Technologies

Assuming the 90 days trading horizon Roper Technologies, is expected to generate 0.02 times more return on investment than Trane Technologies. However, Roper Technologies, is 40.6 times less risky than Trane Technologies. It trades about -0.01 of its potential returns per unit of risk. Trane Technologies plc is currently generating about -0.21 per unit of risk. If you would invest  33,303  in Roper Technologies, on October 11, 2024 and sell it today you would lose (3.00) from holding Roper Technologies, or give up 0.01% of portfolio value over 90 days.

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

Roper Technologies,  vs.  Trane Technologies plc

Roper Technologies,

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Roper Technologies, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Roper Technologies, sustained solid returns over the last few months and may actually be approaching a breakup point.

Trane Technologies plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trane Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roper Technologies, and Trane Technologies

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

The idea behind Roper Technologies, and Trane Technologies plc 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.