Correlation Between Transcontinental and Westport Fuel

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

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

Diversification Opportunities for Transcontinental and Westport Fuel

-0.43

Correlation Coefficient

Transcontinental  Westport Fuel

Very good diversification

The 3 months correlation between Transcontinental and Westport is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Transcontinental and Westport Fuel Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westport Fuel Systems and Transcontinental 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 Transcontinental are associated (or correlated) with Westport Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westport Fuel Systems has no effect on the direction of Transcontinental i.e., Transcontinental and Westport Fuel go up and down completely randomly.

Pair Corralation between Transcontinental and Westport Fuel

Assuming the 90 days trading horizon Transcontinental is expected to under-perform the Westport Fuel. But the stock apears to be less risky and, when comparing its historical volatility, Transcontinental is 3.07 times less risky than Westport Fuel. The stock trades about -0.13 of its potential returns per unit of risk. The Westport Fuel Systems is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  488.00  in Westport Fuel Systems on October 21, 2024 and sell it today you would earn a total of  62.00  from holding Westport Fuel Systems or generate 12.7% return on investment over 90 days.

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

Transcontinental  vs.  Westport Fuel Systems

Transcontinental

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Transcontinental is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Westport Fuel Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westport Fuel Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Transcontinental and Westport Fuel

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

The idea behind Transcontinental and Westport Fuel Systems 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 Commodity Directory module to find actively traded commodities issued by global exchanges.