Correlation Between Grupo Sports and Transocean

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

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

Diversification Opportunities for Grupo Sports and Transocean

0.34

Correlation Coefficient

Grupo Sports  Transocean

Weak diversification

The 3 months correlation between Grupo and Transocean is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Sports World and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Grupo Sports 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 Grupo Sports World 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 Grupo Sports i.e., Grupo Sports and Transocean go up and down completely randomly.

Pair Corralation between Grupo Sports and Transocean

Assuming the 90 days trading horizon Grupo Sports World is expected to under-perform the Transocean. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Sports World is 2.14 times less risky than Transocean. The stock trades about -0.03 of its potential returns per unit of risk. The Transocean is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,200  in Transocean on October 25, 2024 and sell it today you would earn a total of  400.00  from holding Transocean or generate 4.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Grupo Sports World  vs.  Transocean

Grupo Sports World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Sports World has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grupo Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transocean

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transocean are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Transocean may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Grupo Sports and Transocean

The main advantage of trading using opposite Grupo Sports and Transocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Sports 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 Grupo Sports World 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.