Correlation Between TOTAL BANGUN and TOTAL GABON

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

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

Diversification Opportunities for TOTAL BANGUN and TOTAL GABON

0.2

Correlation Coefficient

TOTAL BANGUN  TOTAL GABON

Modest diversification

The 3 months correlation between TOTAL and TOTAL is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding TOTAL BANGUN PERSAD and TOTAL GABON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL GABON and TOTAL BANGUN 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 TOTAL BANGUN PERSAD are associated (or correlated) with TOTAL GABON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL GABON has no effect on the direction of TOTAL BANGUN i.e., TOTAL BANGUN and TOTAL GABON go up and down completely randomly.

Pair Corralation between TOTAL BANGUN and TOTAL GABON

Assuming the 90 days trading horizon TOTAL BANGUN is expected to generate 1.39 times less return on investment than TOTAL GABON. But when comparing it to its historical volatility, TOTAL BANGUN PERSAD is 2.72 times less risky than TOTAL GABON. It trades about 0.22 of its potential returns per unit of risk. TOTAL GABON is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  15,550  in TOTAL GABON on September 3, 2024 and sell it today you would earn a total of  2,850  from holding TOTAL GABON or generate 18.33% return on investment over 90 days.

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

TOTAL BANGUN PERSAD  vs.  TOTAL GABON

TOTAL BANGUN PERSAD

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TOTAL BANGUN PERSAD are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, TOTAL BANGUN unveiled solid returns over the last few months and may actually be approaching a breakup point.

TOTAL GABON

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with TOTAL BANGUN and TOTAL GABON

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

The idea behind TOTAL BANGUN PERSAD and TOTAL GABON 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.