Correlation Between Tenneco and Maximus
Can any of the company-specific risk be diversified away by investing in both Tenneco and Maximus 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 Tenneco and Maximus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tenneco and Maximus, you can compare the effects of market volatilities on Tenneco and Maximus 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 Tenneco with a short position of Maximus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenneco and Maximus.
Diversification Opportunities for Tenneco and Maximus
Excellent diversification
The 3 months correlation between Tenneco and Maximus is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tenneco and Maximus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maximus and Tenneco 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 Tenneco are associated (or correlated) with Maximus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maximus has no effect on the direction of Tenneco i.e., Tenneco and Maximus go up and down completely randomly.
Pair Corralation between Tenneco and Maximus
Considering the 90-day investment horizon Tenneco is expected to generate 1.26 times more return on investment than Maximus. However, Tenneco is 1.26 times more volatile than Maximus. It trades about 0.09 of its potential returns per unit of risk. Maximus is currently generating about 0.03 per unit of risk. If you would invest 1,567 in Tenneco on January 26, 2024 and sell it today you would earn a total of 432.00 from holding Tenneco or generate 27.57% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 27.53% |
Values | Daily Returns |
Tenneco vs. Maximus
Performance |
Timeline |
Tenneco |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Maximus |
Tenneco and Maximus Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tenneco and Maximus
The main advantage of trading using opposite Tenneco and Maximus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tenneco position performs unexpectedly, Maximus 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 Maximus will offset losses from the drop in Maximus' long position.The idea behind Tenneco and Maximus 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.Maximus vs. First Advantage Corp | Maximus vs. Rentokil Initial PLC | Maximus vs. CBIZ Inc | Maximus vs. Civeo Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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