Correlation Between TLT and PCF Group

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

By analyzing existing cross correlation between TLT and PCF Group SA, you can compare the effects of market volatilities on TLT and PCF Group 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 TLT with a short position of PCF Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of TLT and PCF Group.

Diversification Opportunities for TLT and PCF Group

-0.38

Correlation Coefficient

TLT  PCF Group

Very good diversification

The 3 months correlation between TLT and PCF is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding TLT and PCF Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCF Group SA and TLT 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 TLT are associated (or correlated) with PCF Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCF Group SA has no effect on the direction of TLT i.e., TLT and PCF Group go up and down completely randomly.

Pair Corralation between TLT and PCF Group

Assuming the 90 days trading horizon TLT is expected to under-perform the PCF Group. In addition to that, TLT is 2.27 times more volatile than PCF Group SA. It trades about -0.14 of its total potential returns per unit of risk. PCF Group SA is currently generating about -0.29 per unit of volatility. If you would invest  1,134  in PCF Group SA on August 26, 2024 and sell it today you would lose (205.00) from holding PCF Group SA or give up 18.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

TLT  vs.  PCF Group SA

TLT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TLT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, TLT reported solid returns over the last few months and may actually be approaching a breakup point.

PCF Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PCF Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with TLT and PCF Group

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

The idea behind TLT and PCF Group SA 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 CEOs Directory module to screen CEOs from public companies around the world.