Correlation Between Trane Technologies and Aris Mining

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

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

Diversification Opportunities for Trane Technologies and Aris Mining

-0.51

Correlation Coefficient

Trane Technologies  Aris Mining

Excellent diversification

The 3 months correlation between Trane and Aris is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Aris Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Mining and Trane Technologies 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 Trane Technologies plc are associated (or correlated) with Aris Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Mining has no effect on the direction of Trane Technologies i.e., Trane Technologies and Aris Mining go up and down completely randomly.

Pair Corralation between Trane Technologies and Aris Mining

Allowing for the 90-day total investment horizon Trane Technologies plc is expected to under-perform the Aris Mining. But the stock apears to be less risky and, when comparing its historical volatility, Trane Technologies plc is 1.72 times less risky than Aris Mining. The stock trades about -0.02 of its potential returns per unit of risk. The Aris Mining is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  358.00  in Aris Mining on December 26, 2024 and sell it today you would earn a total of  109.00  from holding Aris Mining or generate 30.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Trane Technologies plc  vs.  Aris Mining

Trane Technologies plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trane Technologies plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Trane Technologies is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Aris Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting primary indicators, Aris Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trane Technologies and Aris Mining

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

The idea behind Trane Technologies plc and Aris Mining 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.