Correlation Between Transportadora and New Horizon

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

By analyzing existing cross correlation between Transportadora de Gas and New Horizon Aircraft, you can compare the effects of market volatilities on Transportadora and New Horizon 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 Transportadora with a short position of New Horizon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and New Horizon.

Diversification Opportunities for Transportadora and New Horizon

0.78

Correlation Coefficient

Transportadora  New Horizon

Poor diversification

The 3 months correlation between Transportadora and New is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and New Horizon Aircraft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Aircraft and Transportadora 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 Transportadora de Gas are associated (or correlated) with New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Aircraft has no effect on the direction of Transportadora i.e., Transportadora and New Horizon go up and down completely randomly.

Pair Corralation between Transportadora and New Horizon

Considering the 90-day investment horizon Transportadora is expected to generate 4.63 times less return on investment than New Horizon. But when comparing it to its historical volatility, Transportadora de Gas is 4.58 times less risky than New Horizon. It trades about 0.18 of its potential returns per unit of risk. New Horizon Aircraft is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  31.00  in New Horizon Aircraft on October 25, 2024 and sell it today you would earn a total of  53.42  from holding New Horizon Aircraft or generate 172.32% return on investment over 90 days.

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

Transportadora de Gas  vs.  New Horizon Aircraft

Transportadora de Gas

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora unveiled solid returns over the last few months and may actually be approaching a breakup point.

New Horizon Aircraft

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, New Horizon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transportadora and New Horizon

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

The idea behind Transportadora de Gas and New Horizon Aircraft 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.