Correlation Between Transport and Cambridge Technology

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

By analyzing existing cross correlation between Transport of and Cambridge Technology Enterprises, you can compare the effects of market volatilities on Transport and Cambridge Technology 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 Cambridge Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport and Cambridge Technology.

Diversification Opportunities for Transport and Cambridge Technology

0.15

Correlation Coefficient

Transport  Cambridge Technology

Average diversification

The 3 months correlation between Transport and Cambridge is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Transport of and Cambridge Technology Enterpris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambridge Technology 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 of are associated (or correlated) with Cambridge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambridge Technology has no effect on the direction of Transport i.e., Transport and Cambridge Technology go up and down completely randomly.

Pair Corralation between Transport and Cambridge Technology

Assuming the 90 days trading horizon Transport of is expected to generate 1.34 times more return on investment than Cambridge Technology. However, Transport is 1.34 times more volatile than Cambridge Technology Enterprises. It trades about 0.05 of its potential returns per unit of risk. Cambridge Technology Enterprises is currently generating about 0.05 per unit of risk. If you would invest  72,048  in Transport of on October 3, 2024 and sell it today you would earn a total of  43,002  from holding Transport of or generate 59.69% return on investment over 90 days.

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

Transport of  vs.  Cambridge Technology Enterpris

Transport

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transport of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Transport may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cambridge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambridge Technology Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Cambridge Technology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Transport and Cambridge Technology

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

The idea behind Transport of and Cambridge Technology Enterprises 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.