Correlation Between Rex Trueform and Truworths International

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

By analyzing existing cross correlation between Rex Trueform Group and Truworths International, you can compare the effects of market volatilities on Rex Trueform and Truworths International 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 Rex Trueform with a short position of Truworths International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rex Trueform and Truworths International.

Diversification Opportunities for Rex Trueform and Truworths International

0.05

Correlation Coefficient

Rex Trueform  Truworths International

Significant diversification

The 3 months correlation between Rex and Truworths is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rex Trueform Group and Truworths International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truworths International and Rex Trueform 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 Rex Trueform Group are associated (or correlated) with Truworths International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truworths International has no effect on the direction of Rex Trueform i.e., Rex Trueform and Truworths International go up and down completely randomly.

Pair Corralation between Rex Trueform and Truworths International

Assuming the 90 days trading horizon Rex Trueform Group is expected to generate 0.02 times more return on investment than Truworths International. However, Rex Trueform Group is 64.01 times less risky than Truworths International. It trades about -0.07 of its potential returns per unit of risk. Truworths International is currently generating about -0.01 per unit of risk. If you would invest  112,800  in Rex Trueform Group on September 23, 2024 and sell it today you would lose (100.00) from holding Rex Trueform Group or give up 0.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Rex Trueform Group  vs.  Truworths International

Rex Trueform Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rex Trueform Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Rex Trueform is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Truworths International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truworths International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Truworths International is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rex Trueform and Truworths International

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

The idea behind Rex Trueform Group and Truworths International 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.