Correlation Between Transocean and Harley Davidson

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

By analyzing existing cross correlation between Transocean and Harley Davidson, you can compare the effects of market volatilities on Transocean and Harley Davidson 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 Harley Davidson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transocean and Harley Davidson.

Diversification Opportunities for Transocean and Harley Davidson

0.29

Correlation Coefficient

Transocean  Harley Davidson

Modest diversification

The 3 months correlation between Transocean and Harley is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Transocean and Harley Davidson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harley Davidson 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 Harley Davidson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harley Davidson has no effect on the direction of Transocean i.e., Transocean and Harley Davidson go up and down completely randomly.

Pair Corralation between Transocean and Harley Davidson

Considering the 90-day investment horizon Transocean is expected to generate 1.51 times more return on investment than Harley Davidson. However, Transocean is 1.51 times more volatile than Harley Davidson. It trades about 0.0 of its potential returns per unit of risk. Harley Davidson is currently generating about -0.1 per unit of risk. If you would invest  425.00  in Transocean on October 10, 2024 and sell it today you would lose (9.00) from holding Transocean or give up 2.12% of portfolio value over 90 days.

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

Transocean  vs.  Harley Davidson

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 nearly stable forward indicators, Transocean is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Harley Davidson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harley Davidson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Transocean and Harley Davidson

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

The idea behind Transocean and Harley Davidson 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.