Correlation Between Tier1 Technology and Caixabank

Can any of the company-specific risk be diversified away by investing in both Tier1 Technology and Caixabank 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 Tier1 Technology and Caixabank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tier1 Technology SA and Caixabank SA, you can compare the effects of market volatilities on Tier1 Technology and Caixabank 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 Tier1 Technology with a short position of Caixabank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tier1 Technology and Caixabank.

Diversification Opportunities for Tier1 Technology and Caixabank

-0.16

Correlation Coefficient

Tier1 Technology  Caixabank

Good diversification

The 3 months correlation between Tier1 and Caixabank is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Tier1 Technology SA and Caixabank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caixabank SA and Tier1 Technology 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 Tier1 Technology SA are associated (or correlated) with Caixabank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caixabank SA has no effect on the direction of Tier1 Technology i.e., Tier1 Technology and Caixabank go up and down completely randomly.

Pair Corralation between Tier1 Technology and Caixabank

Assuming the 90 days trading horizon Tier1 Technology SA is expected to generate 1.19 times more return on investment than Caixabank. However, Tier1 Technology is 1.19 times more volatile than Caixabank SA. It trades about 0.08 of its potential returns per unit of risk. Caixabank SA is currently generating about -0.02 per unit of risk. If you would invest  268.00  in Tier1 Technology SA on September 13, 2024 and sell it today you would earn a total of  30.00  from holding Tier1 Technology SA or generate 11.19% return on investment over 90 days.

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

Tier1 Technology SA  vs.  Caixabank SA

Tier1 Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tier1 Technology SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Tier1 Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Caixabank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caixabank SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Caixabank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tier1 Technology and Caixabank

The main advantage of trading using opposite Tier1 Technology and Caixabank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tier1 Technology position performs unexpectedly, Caixabank 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 Caixabank will offset losses from the drop in Caixabank's long position.

The idea behind Tier1 Technology SA and Caixabank SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.