Correlation Between Terminal X and Sure Tech

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

By analyzing existing cross correlation between Terminal X Online and Sure Tech Investments LP, you can compare the effects of market volatilities on Terminal X and Sure Tech 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 Terminal X with a short position of Sure Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terminal X and Sure Tech.

Diversification Opportunities for Terminal X and Sure Tech

0.26

Correlation Coefficient

Terminal X  Sure Tech

Modest diversification

The 3 months correlation between Terminal and Sure is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Terminal X Online and Sure Tech Investments LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sure Tech Investments and Terminal X 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 Terminal X Online are associated (or correlated) with Sure Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sure Tech Investments has no effect on the direction of Terminal X i.e., Terminal X and Sure Tech go up and down completely randomly.

Pair Corralation between Terminal X and Sure Tech

Assuming the 90 days trading horizon Terminal X Online is expected to under-perform the Sure Tech. But the stock apears to be less risky and, when comparing its historical volatility, Terminal X Online is 1.04 times less risky than Sure Tech. The stock trades about -0.09 of its potential returns per unit of risk. The Sure Tech Investments LP is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  74,510  in Sure Tech Investments LP on December 30, 2024 and sell it today you would lose (3,540) from holding Sure Tech Investments LP or give up 4.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.08%
Values	Daily Returns

Terminal X Online  vs.  Sure Tech Investments LP

Terminal X Online

Risk-Adjusted Performance

Very Weak

Over the last 90 days Terminal X Online has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sure Tech Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sure Tech Investments LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sure Tech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Terminal X and Sure Tech

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

The idea behind Terminal X Online and Sure Tech Investments LP 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.