Correlation Between Truworths International and Advtech

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

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

Diversification Opportunities for Truworths International and Advtech

-0.13

Correlation Coefficient

Truworths International  Advtech

Good diversification

The 3 months correlation between Truworths and Advtech is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Truworths International and Advtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advtech and Truworths International 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 Truworths International are associated (or correlated) with Advtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advtech has no effect on the direction of Truworths International i.e., Truworths International and Advtech go up and down completely randomly.

Pair Corralation between Truworths International and Advtech

Assuming the 90 days trading horizon Truworths International is expected to under-perform the Advtech. In addition to that, Truworths International is 1.49 times more volatile than Advtech. It trades about -0.02 of its total potential returns per unit of risk. Advtech is currently generating about 0.06 per unit of volatility. If you would invest  317,000  in Advtech on October 10, 2024 and sell it today you would earn a total of  13,700  from holding Advtech or generate 4.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Truworths International  vs.  Advtech

Truworths International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truworths International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Truworths International is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Advtech

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advtech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Advtech is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Truworths International and Advtech

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

The idea behind Truworths International and Advtech 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.