Correlation Between Trane Technologies and World Houseware

Can any of the company-specific risk be diversified away by investing in both Trane Technologies and World Houseware 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 World Houseware 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 World Houseware Limited, you can compare the effects of market volatilities on Trane Technologies and World Houseware 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 World Houseware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and World Houseware.

Diversification Opportunities for Trane Technologies and World Houseware

0.0

Correlation Coefficient

Trane Technologies  World Houseware

Pay attention - limited upside

The 3 months correlation between Trane and World is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and World Houseware Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Houseware 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 World Houseware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Houseware has no effect on the direction of Trane Technologies i.e., Trane Technologies and World Houseware go up and down completely randomly.

Pair Corralation between Trane Technologies and World Houseware

Allowing for the 90-day total investment horizon Trane Technologies plc is expected to generate 0.33 times more return on investment than World Houseware. However, Trane Technologies plc is 3.07 times less risky than World Houseware. It trades about 0.14 of its potential returns per unit of risk. World Houseware Limited is currently generating about 0.01 per unit of risk. If you would invest  19,230  in Trane Technologies plc on September 12, 2024 and sell it today you would earn a total of  20,512  from holding Trane Technologies plc or generate 106.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Trane Technologies plc  vs.  World Houseware Limited

Trane Technologies plc

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Trane Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

World Houseware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Houseware Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, World Houseware is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Trane Technologies and World Houseware

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

The idea behind Trane Technologies plc and World Houseware Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.