Correlation Between Transocean and CONSOLIDATED

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

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

Diversification Opportunities for Transocean and CONSOLIDATED

-0.15

Correlation Coefficient

Transocean  CONSOLIDATED

Good diversification

The 3 months correlation between Transocean and CONSOLIDATED is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Transocean and CONSOLIDATED EDISON N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOLIDATED EDISON 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 CONSOLIDATED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSOLIDATED EDISON has no effect on the direction of Transocean i.e., Transocean and CONSOLIDATED go up and down completely randomly.

Pair Corralation between Transocean and CONSOLIDATED

Considering the 90-day investment horizon Transocean is expected to under-perform the CONSOLIDATED. In addition to that, Transocean is 1.24 times more volatile than CONSOLIDATED EDISON N. It trades about -0.06 of its total potential returns per unit of risk. CONSOLIDATED EDISON N is currently generating about 0.02 per unit of volatility. If you would invest  8,103  in CONSOLIDATED EDISON N on September 15, 2024 and sell it today you would earn a total of  56.00  from holding CONSOLIDATED EDISON N or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.87%
Values	Daily Returns

Transocean  vs.  CONSOLIDATED EDISON N

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 latest uncertain performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CONSOLIDATED EDISON

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CONSOLIDATED EDISON N are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CONSOLIDATED is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Transocean and CONSOLIDATED

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

The idea behind Transocean and CONSOLIDATED EDISON N 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.