Correlation Between TRANSILVANIA LEASING and Rompetrol Well

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

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

Diversification Opportunities for TRANSILVANIA LEASING and Rompetrol Well

0.64

Correlation Coefficient

TRANSILVANIA LEASING  Rompetrol Well

Poor diversification

The 3 months correlation between TRANSILVANIA and Rompetrol is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding TRANSILVANIA LEASING SI and Rompetrol Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rompetrol Well and TRANSILVANIA LEASING 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 TRANSILVANIA LEASING SI are associated (or correlated) with Rompetrol Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rompetrol Well has no effect on the direction of TRANSILVANIA LEASING i.e., TRANSILVANIA LEASING and Rompetrol Well go up and down completely randomly.

Pair Corralation between TRANSILVANIA LEASING and Rompetrol Well

Assuming the 90 days trading horizon TRANSILVANIA LEASING SI is expected to under-perform the Rompetrol Well. In addition to that, TRANSILVANIA LEASING is 1.48 times more volatile than Rompetrol Well. It trades about -0.04 of its total potential returns per unit of risk. Rompetrol Well is currently generating about -0.01 per unit of volatility. If you would invest  60.00  in Rompetrol Well on September 12, 2024 and sell it today you would lose (1.00) from holding Rompetrol Well or give up 1.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

TRANSILVANIA LEASING SI  vs.  Rompetrol Well

TRANSILVANIA LEASING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRANSILVANIA LEASING SI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Rompetrol Well

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rompetrol Well has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Rompetrol Well is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with TRANSILVANIA LEASING and Rompetrol Well

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

The idea behind TRANSILVANIA LEASING SI and Rompetrol Well 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..