Correlation Between Transport and Telecoms Informatics

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

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

Diversification Opportunities for Transport and Telecoms Informatics

-0.68

Correlation Coefficient

Transport  Telecoms Informatics

Excellent diversification

The 3 months correlation between Transport and Telecoms is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and Telecoms Informatics JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecoms Informatics JSC and Transport 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 Transport and Industry are associated (or correlated) with Telecoms Informatics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecoms Informatics JSC has no effect on the direction of Transport i.e., Transport and Telecoms Informatics go up and down completely randomly.

Pair Corralation between Transport and Telecoms Informatics

Assuming the 90 days trading horizon Transport and Industry is expected to under-perform the Telecoms Informatics. In addition to that, Transport is 2.95 times more volatile than Telecoms Informatics JSC. It trades about -0.13 of its total potential returns per unit of risk. Telecoms Informatics JSC is currently generating about 0.05 per unit of volatility. If you would invest  1,076,078  in Telecoms Informatics JSC on September 23, 2024 and sell it today you would earn a total of  288,922  from holding Telecoms Informatics JSC or generate 26.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.63%
Values	Daily Returns

Transport and Industry  vs.  Telecoms Informatics JSC

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport and Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Telecoms Informatics JSC

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Transport and Telecoms Informatics

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

The idea behind Transport and Industry and Telecoms Informatics JSC 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.