Correlation Between Transport and Selan Exploration

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

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

Diversification Opportunities for Transport and Selan Exploration

0.6

Correlation Coefficient

Transport  Selan Exploration

Poor diversification

The 3 months correlation between Transport and Selan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Transport of and Selan Exploration Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selan Exploration 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 Selan Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selan Exploration has no effect on the direction of Transport i.e., Transport and Selan Exploration go up and down completely randomly.

Pair Corralation between Transport and Selan Exploration

Assuming the 90 days trading horizon Transport of is expected to generate 0.96 times more return on investment than Selan Exploration. However, Transport of is 1.05 times less risky than Selan Exploration. It trades about 0.09 of its potential returns per unit of risk. Selan Exploration Technology is currently generating about 0.01 per unit of risk. If you would invest  102,110  in Transport of on October 8, 2024 and sell it today you would earn a total of  13,730  from holding Transport of or generate 13.45% return on investment over 90 days.

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

Transport of  vs.  Selan Exploration Technology

Transport

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transport of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Transport exhibited solid returns over the last few months and may actually be approaching a breakup point.

Selan Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Selan Exploration Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Selan Exploration is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Transport and Selan Exploration

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

The idea behind Transport of and Selan Exploration Technology 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.