Correlation Between Transocean and Atlantic American

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

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

Diversification Opportunities for Transocean and Atlantic American

0.19

Correlation Coefficient

Transocean  Atlantic American

Average diversification

The 3 months correlation between Transocean and Atlantic is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Transocean and Atlantic American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic American and Transocean 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 Transocean are associated (or correlated) with Atlantic American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic American has no effect on the direction of Transocean i.e., Transocean and Atlantic American go up and down completely randomly.

Pair Corralation between Transocean and Atlantic American

Considering the 90-day investment horizon Transocean is expected to under-perform the Atlantic American. But the stock apears to be less risky and, when comparing its historical volatility, Transocean is 1.35 times less risky than Atlantic American. The stock trades about -0.33 of its potential returns per unit of risk. The Atlantic American is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  170.00  in Atlantic American on September 19, 2024 and sell it today you would lose (15.00) from holding Atlantic American or give up 8.82% of portfolio value over 90 days.

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

Transocean  vs.  Atlantic American

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Atlantic American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlantic American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Atlantic American is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Transocean and Atlantic American

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

The idea behind Transocean and Atlantic American 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.