Correlation Between TRANSILVANIA INVESTMENTS and Rompetrol Rafi

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

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

Diversification Opportunities for TRANSILVANIA INVESTMENTS and Rompetrol Rafi

0.48

Correlation Coefficient

TRANSILVANIA INVESTMENTS  Rompetrol Rafi

Very weak diversification

The 3 months correlation between TRANSILVANIA and Rompetrol is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding TRANSILVANIA INVESTMENTS ALLIA and Rompetrol Rafi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rompetrol Rafi and TRANSILVANIA INVESTMENTS 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 TRANSILVANIA INVESTMENTS ALLIANCE are associated (or correlated) with Rompetrol Rafi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rompetrol Rafi has no effect on the direction of TRANSILVANIA INVESTMENTS i.e., TRANSILVANIA INVESTMENTS and Rompetrol Rafi go up and down completely randomly.

Pair Corralation between TRANSILVANIA INVESTMENTS and Rompetrol Rafi

Assuming the 90 days trading horizon TRANSILVANIA INVESTMENTS ALLIANCE is expected to generate 1.03 times more return on investment than Rompetrol Rafi. However, TRANSILVANIA INVESTMENTS is 1.03 times more volatile than Rompetrol Rafi. It trades about -0.07 of its potential returns per unit of risk. Rompetrol Rafi is currently generating about -0.08 per unit of risk. If you would invest  38.00  in TRANSILVANIA INVESTMENTS ALLIANCE on December 27, 2024 and sell it today you would lose (3.00) from holding TRANSILVANIA INVESTMENTS ALLIANCE or give up 7.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

TRANSILVANIA INVESTMENTS ALLIA  vs.  Rompetrol Rafi

TRANSILVANIA INVESTMENTS

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRANSILVANIA INVESTMENTS ALLIANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Rompetrol Rafi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rompetrol Rafi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with TRANSILVANIA INVESTMENTS and Rompetrol Rafi

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

The idea behind TRANSILVANIA INVESTMENTS ALLIANCE and Rompetrol Rafi 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.