Correlation Between Rompetrol Rafi and TRANSILVANIA INVESTMENTS

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

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

Diversification Opportunities for Rompetrol Rafi and TRANSILVANIA INVESTMENTS

0.48

Correlation Coefficient

Rompetrol Rafi  TRANSILVANIA INVESTMENTS

Very weak diversification

The 3 months correlation between Rompetrol and TRANSILVANIA is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Rompetrol Rafi and TRANSILVANIA INVESTMENTS ALLIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRANSILVANIA INVESTMENTS and Rompetrol Rafi 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 Rompetrol Rafi are associated (or correlated) with TRANSILVANIA INVESTMENTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRANSILVANIA INVESTMENTS has no effect on the direction of Rompetrol Rafi i.e., Rompetrol Rafi and TRANSILVANIA INVESTMENTS go up and down completely randomly.

Pair Corralation between Rompetrol Rafi and TRANSILVANIA INVESTMENTS

Assuming the 90 days trading horizon Rompetrol Rafi is expected to under-perform the TRANSILVANIA INVESTMENTS. But the stock apears to be less risky and, when comparing its historical volatility, Rompetrol Rafi is 1.03 times less risky than TRANSILVANIA INVESTMENTS. The stock trades about -0.08 of its potential returns per unit of risk. The TRANSILVANIA INVESTMENTS ALLIANCE is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  38.00  in TRANSILVANIA INVESTMENTS ALLIANCE on December 27, 2024 and sell it today you would lose (3.00) from holding TRANSILVANIA INVESTMENTS ALLIANCE or give up 7.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Rompetrol Rafi  vs.  TRANSILVANIA INVESTMENTS ALLIA

Rompetrol Rafi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rompetrol Rafi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

TRANSILVANIA INVESTMENTS

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRANSILVANIA INVESTMENTS ALLIANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Rompetrol Rafi and TRANSILVANIA INVESTMENTS

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

The idea behind Rompetrol Rafi and TRANSILVANIA INVESTMENTS ALLIANCE 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.