Correlation Between Transcat and DXP Enterprises

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

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

Diversification Opportunities for Transcat and DXP Enterprises

-0.48

Correlation Coefficient

Transcat  DXP Enterprises

Very good diversification

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

Pair Corralation between Transcat and DXP Enterprises

Given the investment horizon of 90 days Transcat is expected to under-perform the DXP Enterprises. But the stock apears to be less risky and, when comparing its historical volatility, Transcat is 1.1 times less risky than DXP Enterprises. The stock trades about -0.06 of its potential returns per unit of risk. The DXP Enterprises is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,360  in DXP Enterprises on August 31, 2024 and sell it today you would earn a total of  1,933  from holding DXP Enterprises or generate 36.06% return on investment over 90 days.

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

Transcat  vs.  DXP Enterprises

Transcat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transcat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

DXP Enterprises

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DXP Enterprises are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DXP Enterprises exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transcat and DXP Enterprises

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

The idea behind Transcat and DXP Enterprises 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.