Correlation Between Transdigm Group and Kongsberg Gruppen

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Can any of the company-specific risk be diversified away by investing in both Transdigm Group and Kongsberg Gruppen 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 Transdigm Group and Kongsberg Gruppen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transdigm Group Incorporated and Kongsberg Gruppen ASA, you can compare the effects of market volatilities on Transdigm Group and Kongsberg Gruppen 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 Transdigm Group with a short position of Kongsberg Gruppen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transdigm Group and Kongsberg Gruppen.

Diversification Opportunities for Transdigm Group and Kongsberg Gruppen

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Transdigm and Kongsberg is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Transdigm Group Incorporated and Kongsberg Gruppen ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kongsberg Gruppen ASA and Transdigm Group 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 Transdigm Group Incorporated are associated (or correlated) with Kongsberg Gruppen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kongsberg Gruppen ASA has no effect on the direction of Transdigm Group i.e., Transdigm Group and Kongsberg Gruppen go up and down completely randomly.

Pair Corralation between Transdigm Group and Kongsberg Gruppen

Considering the 90-day investment horizon Transdigm Group Incorporated is expected to generate 0.64 times more return on investment than Kongsberg Gruppen. However, Transdigm Group Incorporated is 1.55 times less risky than Kongsberg Gruppen. It trades about -0.01 of its potential returns per unit of risk. Kongsberg Gruppen ASA is currently generating about -0.14 per unit of risk. If you would invest  125,849  in Transdigm Group Incorporated on October 10, 2024 and sell it today you would lose (636.00) from holding Transdigm Group Incorporated or give up 0.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Transdigm Group Incorporated  vs.  Kongsberg Gruppen ASA

 Performance 
       Timeline  
Transdigm Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Transdigm Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Kongsberg Gruppen ASA 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Kongsberg Gruppen ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Kongsberg Gruppen is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Transdigm Group and Kongsberg Gruppen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Transdigm Group and Kongsberg Gruppen

The main advantage of trading using opposite Transdigm Group and Kongsberg Gruppen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transdigm Group position performs unexpectedly, Kongsberg Gruppen 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 Kongsberg Gruppen will offset losses from the drop in Kongsberg Gruppen's long position.
The idea behind Transdigm Group Incorporated and Kongsberg Gruppen ASA 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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