Correlation Between TRON and CEL
Can any of the company-specific risk be diversified away by investing in both TRON and CEL 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 TRON and CEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TRON and CEL, you can compare the effects of market volatilities on TRON and CEL 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 TRON with a short position of CEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRON and CEL.
Diversification Opportunities for TRON and CEL
Very weak diversification
The 3 months correlation between TRON and CEL is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding TRON and CEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEL and TRON 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 TRON are associated (or correlated) with CEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEL has no effect on the direction of TRON i.e., TRON and CEL go up and down completely randomly.
Pair Corralation between TRON and CEL
Assuming the 90 days trading horizon TRON is expected to generate 0.13 times more return on investment than CEL. However, TRON is 7.57 times less risky than CEL. It trades about -0.21 of its potential returns per unit of risk. CEL is currently generating about -0.03 per unit of risk. If you would invest 12.00 in TRON on January 20, 2024 and sell it today you would lose (1.00) from holding TRON or give up 8.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TRON vs. CEL
Performance |
| Timeline |
| TRON |
| CEL |
TRON and CEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRON and CEL
The main advantage of trading using opposite TRON and CEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRON position performs unexpectedly, CEL 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 CEL will offset losses from the drop in CEL's long position.The idea behind TRON and CEL 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 CEOs Directory module to screen CEOs from public companies around the world.
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