Correlation Between Gen Digital and Transocean

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

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

Diversification Opportunities for Gen Digital and Transocean

0.27

Correlation Coefficient

Gen Digital  Transocean

Modest diversification

The 3 months correlation between Gen and Transocean is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Gen Digital 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 Gen Digital are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Gen Digital i.e., Gen Digital and Transocean go up and down completely randomly.

Pair Corralation between Gen Digital and Transocean

Assuming the 90 days trading horizon Gen Digital is expected to generate 0.03 times more return on investment than Transocean. However, Gen Digital is 30.96 times less risky than Transocean. It trades about 0.24 of its potential returns per unit of risk. Transocean is currently generating about -0.02 per unit of risk. If you would invest  17,800  in Gen Digital on October 6, 2024 and sell it today you would earn a total of  93.00  from holding Gen Digital or generate 0.52% return on investment over 90 days.

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

Gen Digital  vs.  Transocean

Gen Digital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gen Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong technical and fundamental indicators, Transocean is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gen Digital and Transocean

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

The idea behind Gen Digital and Transocean 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..