Correlation Between Trencor and Boxer Retail

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

By analyzing existing cross correlation between Trencor and Boxer Retail, you can compare the effects of market volatilities on Trencor and Boxer Retail 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 Boxer Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trencor and Boxer Retail.

Diversification Opportunities for Trencor and Boxer Retail

-0.03

Correlation Coefficient

Trencor  Boxer Retail

Good diversification

The 3 months correlation between Trencor and Boxer is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Trencor and Boxer Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boxer Retail 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 Boxer Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boxer Retail has no effect on the direction of Trencor i.e., Trencor and Boxer Retail go up and down completely randomly.

Pair Corralation between Trencor and Boxer Retail

Assuming the 90 days trading horizon Trencor is expected to generate 26.03 times less return on investment than Boxer Retail. But when comparing it to its historical volatility, Trencor is 4.5 times less risky than Boxer Retail. It trades about 0.04 of its potential returns per unit of risk. Boxer Retail is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  540,000  in Boxer Retail on September 24, 2024 and sell it today you would earn a total of  100,000  from holding Boxer Retail or generate 18.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Trencor  vs.  Boxer Retail

Trencor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trencor 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, Trencor is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Boxer Retail

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boxer Retail are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Boxer Retail exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trencor and Boxer Retail

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

The idea behind Trencor and Boxer Retail 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.