Correlation Between Trencor and Astoria Investments

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

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

Diversification Opportunities for Trencor and Astoria Investments

0.14

Correlation Coefficient

Trencor  Astoria Investments

Average diversification

The 3 months correlation between Trencor and Astoria is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Trencor and Astoria Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astoria Investments and Trencor 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 Trencor are associated (or correlated) with Astoria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astoria Investments has no effect on the direction of Trencor i.e., Trencor and Astoria Investments go up and down completely randomly.

Pair Corralation between Trencor and Astoria Investments

Assuming the 90 days trading horizon Trencor is expected to generate 0.7 times more return on investment than Astoria Investments. However, Trencor is 1.43 times less risky than Astoria Investments. It trades about 0.4 of its potential returns per unit of risk. Astoria Investments is currently generating about 0.01 per unit of risk. If you would invest  74,500  in Trencor on October 14, 2024 and sell it today you would earn a total of  5,000  from holding Trencor or generate 6.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Trencor  vs.  Astoria Investments

Trencor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trencor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Trencor exhibited solid returns over the last few months and may actually be approaching a breakup point.

Astoria Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Trencor and Astoria Investments

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

The idea behind Trencor and Astoria Investments 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.