Correlation Between Transurban and Penta-Ocean Construction

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

By analyzing existing cross correlation between Transurban Group and Penta Ocean Construction Co, you can compare the effects of market volatilities on Transurban and Penta-Ocean Construction 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 Transurban with a short position of Penta-Ocean Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transurban and Penta-Ocean Construction.

Diversification Opportunities for Transurban and Penta-Ocean Construction

0.56

Correlation Coefficient

Transurban  Penta-Ocean Construction

Very weak diversification

The 3 months correlation between Transurban and Penta-Ocean is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Transurban Group and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta-Ocean Construction and Transurban 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 Transurban Group are associated (or correlated) with Penta-Ocean Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta-Ocean Construction has no effect on the direction of Transurban i.e., Transurban and Penta-Ocean Construction go up and down completely randomly.

Pair Corralation between Transurban and Penta-Ocean Construction

Assuming the 90 days horizon Transurban Group is expected to under-perform the Penta-Ocean Construction. But the stock apears to be less risky and, when comparing its historical volatility, Transurban Group is 1.3 times less risky than Penta-Ocean Construction. The stock trades about -0.06 of its potential returns per unit of risk. The Penta Ocean Construction Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  390.00  in Penta Ocean Construction Co on September 4, 2024 and sell it today you would lose (14.00) from holding Penta Ocean Construction Co or give up 3.59% of portfolio value over 90 days.

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

Transurban Group  vs.  Penta Ocean Construction Co

Transurban Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Penta-Ocean Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Transurban and Penta-Ocean Construction

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

The idea behind Transurban Group and Penta Ocean Construction Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.