Correlation Between Plains All and Travis Perkins
Can any of the company-specific risk be diversified away by investing in both Plains All and Travis Perkins 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 Plains All and Travis Perkins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plains All American and Travis Perkins PLC, you can compare the effects of market volatilities on Plains All and Travis Perkins 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 Plains All with a short position of Travis Perkins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plains All and Travis Perkins.
Diversification Opportunities for Plains All and Travis Perkins
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Plains and Travis is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Plains All American and Travis Perkins PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travis Perkins PLC and Plains All 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 Plains All American are associated (or correlated) with Travis Perkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travis Perkins PLC has no effect on the direction of Plains All i.e., Plains All and Travis Perkins go up and down completely randomly.
Pair Corralation between Plains All and Travis Perkins
Considering the 90-day investment horizon Plains All American is expected to under-perform the Travis Perkins. But the stock apears to be less risky and, when comparing its historical volatility, Plains All American is 1.25 times less risky than Travis Perkins. The stock trades about -0.11 of its potential returns per unit of risk. The Travis Perkins PLC is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 992.00 in Travis Perkins PLC on March 13, 2024 and sell it today you would earn a total of 90.00 from holding Travis Perkins PLC or generate 9.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Plains All American vs. Travis Perkins PLC
Performance |
Timeline |
Plains All American |
Travis Perkins PLC |
Plains All and Travis Perkins Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Plains All and Travis Perkins
The main advantage of trading using opposite Plains All and Travis Perkins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plains All position performs unexpectedly, Travis Perkins 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 Travis Perkins will offset losses from the drop in Travis Perkins' long position.Plains All vs. MPLX LP | Plains All vs. Hess Midstream Partners | Plains All vs. Tidewater Midstream and | Plains All vs. Dynagas LNG Partners |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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