Correlation Between Regional Container and Techno Medical

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

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

Diversification Opportunities for Regional Container and Techno Medical

-0.53

Correlation Coefficient

Regional Container  Techno Medical

Excellent diversification

The 3 months correlation between Regional and Techno is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines and Techno Medical Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techno Medical Public and Regional Container 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 Regional Container Lines are associated (or correlated) with Techno Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techno Medical Public has no effect on the direction of Regional Container i.e., Regional Container and Techno Medical go up and down completely randomly.

Pair Corralation between Regional Container and Techno Medical

Assuming the 90 days trading horizon Regional Container Lines is expected to generate 0.6 times more return on investment than Techno Medical. However, Regional Container Lines is 1.66 times less risky than Techno Medical. It trades about -0.05 of its potential returns per unit of risk. Techno Medical Public is currently generating about -0.56 per unit of risk. If you would invest  2,815  in Regional Container Lines on October 4, 2024 and sell it today you would lose (26.00) from holding Regional Container Lines or give up 0.92% of portfolio value over 90 days.

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

Regional Container Lines  vs.  Techno Medical Public

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.

Techno Medical Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Techno Medical Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Regional Container and Techno Medical

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

The idea behind Regional Container Lines and Techno Medical Public 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.