Correlation Between TPG RE and AgJunction

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

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

Diversification Opportunities for TPG RE and AgJunction

-0.35

Correlation Coefficient

TPG RE  AgJunction

Very good diversification

The 3 months correlation between TPG and AgJunction is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding TPG RE Finance and AgJunction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AgJunction and TPG RE 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 TPG RE Finance are associated (or correlated) with AgJunction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AgJunction has no effect on the direction of TPG RE i.e., TPG RE and AgJunction go up and down completely randomly.

Pair Corralation between TPG RE and AgJunction

Given the investment horizon of 90 days TPG RE is expected to generate 16.05 times less return on investment than AgJunction. But when comparing it to its historical volatility, TPG RE Finance is 26.72 times less risky than AgJunction. It trades about 0.09 of its potential returns per unit of risk. AgJunction is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  457.00  in AgJunction on September 13, 2024 and sell it today you would lose (157.00) from holding AgJunction or give up 34.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.98%
Values	Daily Returns

TPG RE Finance  vs.  AgJunction

TPG RE Finance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TPG RE Finance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, TPG RE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

AgJunction

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days AgJunction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady forward-looking indicators, AgJunction showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TPG RE and AgJunction

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

The idea behind TPG RE Finance and AgJunction 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 Stocks Directory module to find actively traded stocks across global markets.