Correlation Between TARGET and 90041LAF2

Can any of the company-specific risk be diversified away by investing in both TARGET and 90041LAF2 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 TARGET and 90041LAF2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TARGET P 7 and US90041LAF22, you can compare the effects of market volatilities on TARGET and 90041LAF2 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 TARGET with a short position of 90041LAF2. Check out your portfolio center. Please also check ongoing floating volatility patterns of TARGET and 90041LAF2.

Diversification Opportunities for TARGET and 90041LAF2

0.12

Correlation Coefficient

TARGET  90041LAF2

Average diversification

The 3 months correlation between TARGET and 90041LAF2 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding TARGET P 7 and US90041LAF22 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US90041LAF22 and TARGET 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 TARGET P 7 are associated (or correlated) with 90041LAF2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US90041LAF22 has no effect on the direction of TARGET i.e., TARGET and 90041LAF2 go up and down completely randomly.

Pair Corralation between TARGET and 90041LAF2

Assuming the 90 days trading horizon TARGET is expected to generate 220.91 times less return on investment than 90041LAF2. But when comparing it to its historical volatility, TARGET P 7 is 52.29 times less risky than 90041LAF2. It trades about 0.02 of its potential returns per unit of risk. US90041LAF22 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,987  in US90041LAF22 on October 9, 2024 and sell it today you would earn a total of  987.00  from holding US90041LAF22 or generate 10.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.46%
Values	Daily Returns

TARGET P 7  vs.  US90041LAF22

TARGET P 7

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TARGET P 7 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, TARGET sustained solid returns over the last few months and may actually be approaching a breakup point.

US90041LAF22

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US90041LAF22 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 90041LAF2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TARGET and 90041LAF2

The main advantage of trading using opposite TARGET and 90041LAF2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TARGET position performs unexpectedly, 90041LAF2 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 90041LAF2 will offset losses from the drop in 90041LAF2's long position.

The idea behind TARGET P 7 and US90041LAF22 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.