diversifiable risk of combining TSX Industrials and Pasofino Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TSX Industrials Capped and Pasofino Gold Limited, you can compare the effects of market volatilities on TSX Industrials and Pasofino Gold 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 TSX Industrials with a short position of Pasofino Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of TSX Industrials and Pasofino Gold.
Diversification Opportunities for TSX Industrials and Pasofino Gold
Pair Corralation between TSX Industrials and Pasofino Gold
Assuming the 90 days trading horizon TSX Industrials is expected to generate 3.81 times less return on investment than Pasofino Gold. But when comparing it to its historical volatility, TSX Industrials Capped is 8.37 times less risky than Pasofino Gold. It trades about 0.07 of its potential returns per unit of risk. Pasofino Gold Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 40.00 in Pasofino Gold Limited on December 5, 2023 and sell it today you would earn a total of 2.00 from holding Pasofino Gold Limited or generate 5.0% return on investment over 90 days.
TSX Industrials Capped vs. Pasofino Gold Limited
TSX Industrials and Pasofino Gold Volatility Contrast
Pair Trading with TSX Industrials and Pasofino GoldThe main advantage of trading using opposite TSX Industrials and Pasofino Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TSX Industrials position performs unexpectedly, Pasofino Gold 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 Pasofino Gold will offset losses from the drop in Pasofino Gold's long position. The idea behind TSX Industrials Capped and Pasofino Gold Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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