Correlation Between Trucept and Futuris

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

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

Diversification Opportunities for Trucept and Futuris

-0.43

Correlation Coefficient

Trucept  Futuris

Very good diversification

The 3 months correlation between Trucept and Futuris is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Trucept and Futuris Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Futuris Company and Trucept 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 Trucept are associated (or correlated) with Futuris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Futuris Company has no effect on the direction of Trucept i.e., Trucept and Futuris go up and down completely randomly.

Pair Corralation between Trucept and Futuris

Given the investment horizon of 90 days Trucept is expected to generate 1.5 times more return on investment than Futuris. However, Trucept is 1.5 times more volatile than Futuris Company. It trades about 0.07 of its potential returns per unit of risk. Futuris Company is currently generating about 0.05 per unit of risk. If you would invest  3.99  in Trucept on December 29, 2024 and sell it today you would earn a total of  0.41  from holding Trucept or generate 10.28% return on investment over 90 days.

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

Trucept  vs.  Futuris Company

Trucept

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Trucept are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Trucept reported solid returns over the last few months and may actually be approaching a breakup point.

Futuris Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Futuris Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Futuris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trucept and Futuris

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

The idea behind Trucept and Futuris Company 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 CEOs Directory module to screen CEOs from public companies around the world.