Correlation Between TransAKT and Alliance Recovery

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

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

Diversification Opportunities for TransAKT and Alliance Recovery

-0.57

Correlation Coefficient

TransAKT  Alliance Recovery

Excellent diversification

The 3 months correlation between TransAKT and Alliance is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding TransAKT and Alliance Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Recovery and TransAKT 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 TransAKT are associated (or correlated) with Alliance Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Recovery has no effect on the direction of TransAKT i.e., TransAKT and Alliance Recovery go up and down completely randomly.

Pair Corralation between TransAKT and Alliance Recovery

Given the investment horizon of 90 days TransAKT is expected to generate 52.84 times more return on investment than Alliance Recovery. However, TransAKT is 52.84 times more volatile than Alliance Recovery. It trades about 0.17 of its potential returns per unit of risk. Alliance Recovery is currently generating about -0.21 per unit of risk. If you would invest  2.77  in TransAKT on September 29, 2024 and sell it today you would lose (2.50) from holding TransAKT or give up 90.25% of portfolio value over 90 days.

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

TransAKT  vs.  Alliance Recovery

TransAKT

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TransAKT are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward-looking signals, TransAKT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alliance Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with TransAKT and Alliance Recovery

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

The idea behind TransAKT and Alliance Recovery 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.