Correlation Between Transocean and WEG SA

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

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

Diversification Opportunities for Transocean and WEG SA

-0.44

Correlation Coefficient

Transocean  WEG SA

Very good diversification

The 3 months correlation between Transocean and WEG is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Transocean and WEG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEG SA 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 WEG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEG SA has no effect on the direction of Transocean i.e., Transocean and WEG SA go up and down completely randomly.

Pair Corralation between Transocean and WEG SA

Assuming the 90 days trading horizon Transocean is expected to under-perform the WEG SA. In addition to that, Transocean is 1.63 times more volatile than WEG SA. It trades about -0.23 of its total potential returns per unit of risk. WEG SA is currently generating about 0.09 per unit of volatility. If you would invest  5,393  in WEG SA on September 23, 2024 and sell it today you would earn a total of  161.00  from holding WEG SA or generate 2.99% return on investment over 90 days.

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

Transocean  vs.  WEG SA

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 weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

WEG SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WEG SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WEG SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Transocean and WEG SA

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

The idea behind Transocean and WEG SA 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.