Correlation Between Transportadora and Rock Tech

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

By analyzing existing cross correlation between Transportadora de Gas and Rock Tech Lithium, you can compare the effects of market volatilities on Transportadora and Rock Tech 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 Transportadora with a short position of Rock Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and Rock Tech.

Diversification Opportunities for Transportadora and Rock Tech

-0.83

Correlation Coefficient

Transportadora  Rock Tech

Pay attention - limited upside

The 3 months correlation between Transportadora and Rock is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium and Transportadora 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 Transportadora de Gas are associated (or correlated) with Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of Transportadora i.e., Transportadora and Rock Tech go up and down completely randomly.

Pair Corralation between Transportadora and Rock Tech

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 0.82 times more return on investment than Rock Tech. However, Transportadora de Gas is 1.22 times less risky than Rock Tech. It trades about 0.07 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about -0.01 per unit of risk. If you would invest  1,030  in Transportadora de Gas on September 25, 2024 and sell it today you would earn a total of  1,610  from holding Transportadora de Gas or generate 156.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Transportadora de Gas  vs.  Rock Tech Lithium

Transportadora de Gas

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Rock Tech is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Transportadora and Rock Tech

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

The idea behind Transportadora de Gas and Rock Tech Lithium 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.