Correlation Between TRON and ALM Classic

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

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

Diversification Opportunities for TRON and ALM Classic

-0.02

Correlation Coefficient

TRON  ALM Classic

Good diversification

The 3 months correlation between TRON and ALM is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding TRON and ALM Classic RA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM Classic RA and TRON 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 TRON are associated (or correlated) with ALM Classic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM Classic RA has no effect on the direction of TRON i.e., TRON and ALM Classic go up and down completely randomly.

Pair Corralation between TRON and ALM Classic

Assuming the 90 days trading horizon TRON is expected to under-perform the ALM Classic. In addition to that, TRON is 13.62 times more volatile than ALM Classic RA. It trades about -0.02 of its total potential returns per unit of risk. ALM Classic RA is currently generating about -0.05 per unit of volatility. If you would invest  37,985  in ALM Classic RA on December 22, 2024 and sell it today you would lose (317.00) from holding ALM Classic RA or give up 0.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

TRON  vs.  ALM Classic RA

TRON

Risk-Adjusted Performance

Very Weak

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

ALM Classic RA

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALM Classic RA has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, ALM Classic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TRON and ALM Classic

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

The idea behind TRON and ALM Classic RA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.