Correlation Between United States and Transportadora

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

By analyzing existing cross correlation between United States Steel and Transportadora de Gas, you can compare the effects of market volatilities on United States and Transportadora 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 United States with a short position of Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Transportadora.

Diversification Opportunities for United States and Transportadora

-0.35

Correlation Coefficient

United States  Transportadora

Very good diversification

The 3 months correlation between United and Transportadora is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas and United States 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 United States Steel are associated (or correlated) with Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of United States i.e., United States and Transportadora go up and down completely randomly.

Pair Corralation between United States and Transportadora

Given the investment horizon of 90 days United States Steel is expected to under-perform the Transportadora. But the stock apears to be less risky and, when comparing its historical volatility, United States Steel is 1.59 times less risky than Transportadora. The stock trades about -0.07 of its potential returns per unit of risk. The Transportadora de Gas is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  337,235  in Transportadora de Gas on February 16, 2024 and sell it today you would earn a total of  92,280  from holding Transportadora de Gas or generate 27.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United States Steel  vs.  Transportadora de Gas

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Transportadora de Gas

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Transportadora sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Transportadora

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

The idea behind United States Steel and Transportadora de Gas 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 Stocks Directory module to find actively traded stocks across global markets.