Correlation Between Total Transport and ABB India

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

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

Diversification Opportunities for Total Transport and ABB India

0.51

Correlation Coefficient

Total Transport  ABB India

Very weak diversification

The 3 months correlation between Total and ABB is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Total Transport Systems and ABB India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB India Limited and Total 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 Total Transport Systems are associated (or correlated) with ABB India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB India Limited has no effect on the direction of Total Transport i.e., Total Transport and ABB India go up and down completely randomly.

Pair Corralation between Total Transport and ABB India

Assuming the 90 days trading horizon Total Transport Systems is expected to under-perform the ABB India. But the stock apears to be less risky and, when comparing its historical volatility, Total Transport Systems is 1.04 times less risky than ABB India. The stock trades about -0.18 of its potential returns per unit of risk. The ABB India Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  759,500  in ABB India Limited on September 11, 2024 and sell it today you would earn a total of  9,825  from holding ABB India Limited or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Total Transport Systems  vs.  ABB India Limited

Total Transport Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Transport Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ABB India Limited

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ABB India Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ABB India is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Total Transport and ABB India

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

The idea behind Total Transport Systems and ABB India Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.