Correlation Between Tree House and Man Infraconstructio

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

By analyzing existing cross correlation between Tree House Education and Man Infraconstruction Limited, you can compare the effects of market volatilities on Tree House and Man Infraconstructio 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 Tree House with a short position of Man Infraconstructio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tree House and Man Infraconstructio.

Diversification Opportunities for Tree House and Man Infraconstructio

0.26

Correlation Coefficient

Tree House  Man Infraconstructio

Modest diversification

The 3 months correlation between Tree and Man is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Tree House Education and Man Infraconstruction Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Man Infraconstruction and Tree House 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 Tree House Education are associated (or correlated) with Man Infraconstructio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Man Infraconstruction has no effect on the direction of Tree House i.e., Tree House and Man Infraconstructio go up and down completely randomly.

Pair Corralation between Tree House and Man Infraconstructio

Assuming the 90 days trading horizon Tree House Education is expected to under-perform the Man Infraconstructio. But the stock apears to be less risky and, when comparing its historical volatility, Tree House Education is 1.19 times less risky than Man Infraconstructio. The stock trades about -0.02 of its potential returns per unit of risk. The Man Infraconstruction Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  18,866  in Man Infraconstruction Limited on October 10, 2024 and sell it today you would earn a total of  5,342  from holding Man Infraconstruction Limited or generate 28.32% return on investment over 90 days.

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

Tree House Education  vs.  Man Infraconstruction Limited

Tree House Education

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Tree House Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Tree House is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Man Infraconstruction

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Man Infraconstruction Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Man Infraconstructio reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tree House and Man Infraconstructio

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

The idea behind Tree House Education and Man Infraconstruction 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.