Correlation Between Rompetrol Rafi and TRANSILVANIA LEASING

Can any of the company-specific risk be diversified away by investing in both Rompetrol Rafi and TRANSILVANIA LEASING 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 LEASING 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 LEASING SI, you can compare the effects of market volatilities on Rompetrol Rafi and TRANSILVANIA LEASING 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 LEASING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rompetrol Rafi and TRANSILVANIA LEASING.

Diversification Opportunities for Rompetrol Rafi and TRANSILVANIA LEASING

-0.14

Correlation Coefficient

Rompetrol Rafi  TRANSILVANIA LEASING

Good diversification

The 3 months correlation between Rompetrol and TRANSILVANIA is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Rompetrol Rafi and TRANSILVANIA LEASING SI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRANSILVANIA LEASING 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 LEASING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRANSILVANIA LEASING has no effect on the direction of Rompetrol Rafi i.e., Rompetrol Rafi and TRANSILVANIA LEASING go up and down completely randomly.

Pair Corralation between Rompetrol Rafi and TRANSILVANIA LEASING

Assuming the 90 days trading horizon Rompetrol Rafi is expected to under-perform the TRANSILVANIA LEASING. But the stock apears to be less risky and, when comparing its historical volatility, Rompetrol Rafi is 1.6 times less risky than TRANSILVANIA LEASING. The stock trades about -0.05 of its potential returns per unit of risk. The TRANSILVANIA LEASING SI is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8.55  in TRANSILVANIA LEASING SI on December 26, 2024 and sell it today you would earn a total of  1.45  from holding TRANSILVANIA LEASING SI or generate 16.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Rompetrol Rafi  vs.  TRANSILVANIA LEASING SI

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 very healthy fundamental indicators, Rompetrol Rafi is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TRANSILVANIA LEASING

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRANSILVANIA LEASING SI are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TRANSILVANIA LEASING displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rompetrol Rafi and TRANSILVANIA LEASING

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

The idea behind Rompetrol Rafi and TRANSILVANIA LEASING SI 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.