Correlation Between Transport and VTC Telecommunicatio

Can any of the company-specific risk be diversified away by investing in both Transport and VTC Telecommunicatio 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 VTC Telecommunicatio 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 VTC Telecommunications JSC, you can compare the effects of market volatilities on Transport and VTC Telecommunicatio 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 VTC Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport and VTC Telecommunicatio.

Diversification Opportunities for Transport and VTC Telecommunicatio

0.05

Correlation Coefficient

Transport  VTC Telecommunicatio

Significant diversification

The 3 months correlation between Transport and VTC is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and VTC Telecommunications JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VTC Telecommunications 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 VTC Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VTC Telecommunications has no effect on the direction of Transport i.e., Transport and VTC Telecommunicatio go up and down completely randomly.

Pair Corralation between Transport and VTC Telecommunicatio

Assuming the 90 days trading horizon Transport and Industry is expected to under-perform the VTC Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Transport and Industry is 1.43 times less risky than VTC Telecommunicatio. The stock trades about -0.2 of its potential returns per unit of risk. The VTC Telecommunications JSC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  830,000  in VTC Telecommunications JSC on September 16, 2024 and sell it today you would earn a total of  10,000  from holding VTC Telecommunications JSC or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Transport and Industry  vs.  VTC Telecommunications 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.

VTC Telecommunications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VTC Telecommunications JSC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, VTC Telecommunicatio is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Transport and VTC Telecommunicatio

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

The idea behind Transport and Industry and VTC Telecommunications 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.