Correlation Between Tredegar and Industrials Portfolio

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

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

Diversification Opportunities for Tredegar and Industrials Portfolio

0.68

Correlation Coefficient

Tredegar  Industrials Portfolio

Poor diversification

The 3 months correlation between Tredegar and Industrials is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tredegar and Industrials Portfolio Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrials Portfolio and Tredegar 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 Tredegar are associated (or correlated) with Industrials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrials Portfolio has no effect on the direction of Tredegar i.e., Tredegar and Industrials Portfolio go up and down completely randomly.

Pair Corralation between Tredegar and Industrials Portfolio

Allowing for the 90-day total investment horizon Tredegar is expected to generate 1.79 times more return on investment than Industrials Portfolio. However, Tredegar is 1.79 times more volatile than Industrials Portfolio Industrials. It trades about 0.02 of its potential returns per unit of risk. Industrials Portfolio Industrials is currently generating about -0.03 per unit of risk. If you would invest  756.00  in Tredegar on December 30, 2024 and sell it today you would earn a total of  14.00  from holding Tredegar or generate 1.85% return on investment over 90 days.

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

Tredegar  vs.  Industrials Portfolio Industri

Tredegar

Risk-Adjusted Performance

Weak

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

Industrials Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrials Portfolio Industrials has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Industrials Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tredegar and Industrials Portfolio

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

The idea behind Tredegar and Industrials Portfolio Industrials 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.