Correlation Between Total Transport and Salzer Electronics

Can any of the company-specific risk be diversified away by investing in both Total Transport and Salzer Electronics 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 Salzer Electronics 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 Salzer Electronics Limited, you can compare the effects of market volatilities on Total Transport and Salzer Electronics 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 Salzer Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Transport and Salzer Electronics.

Diversification Opportunities for Total Transport and Salzer Electronics

0.24

Correlation Coefficient

Total Transport  Salzer Electronics

Modest diversification

The 3 months correlation between Total and Salzer is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Total Transport Systems and Salzer Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salzer Electronics 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 Salzer Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salzer Electronics has no effect on the direction of Total Transport i.e., Total Transport and Salzer Electronics go up and down completely randomly.

Pair Corralation between Total Transport and Salzer Electronics

Assuming the 90 days trading horizon Total Transport Systems is expected to generate 1.08 times more return on investment than Salzer Electronics. However, Total Transport is 1.08 times more volatile than Salzer Electronics Limited. It trades about -0.02 of its potential returns per unit of risk. Salzer Electronics Limited is currently generating about -0.22 per unit of risk. If you would invest  7,306  in Total Transport Systems on December 2, 2024 and sell it today you would lose (543.00) from holding Total Transport Systems or give up 7.43% of portfolio value over 90 days.

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

Total Transport Systems  vs.  Salzer Electronics Limited

Total Transport Systems

Risk-Adjusted Performance

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 very healthy basic indicators, Total Transport is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Salzer Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salzer Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Total Transport and Salzer Electronics

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

The idea behind Total Transport Systems and Salzer Electronics 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.