Correlation Between Retailing Portfolio and Transportation Portfolio

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

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

Diversification Opportunities for Retailing Portfolio and Transportation Portfolio

0.87

Correlation Coefficient

Retailing Portfolio  Transportation Portfolio

Very poor diversification

The 3 months correlation between Retailing and Transportation is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Retailing Portfolio Retailing and Transportation Portfolio Trans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportation Portfolio and Retailing Portfolio 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 Retailing Portfolio Retailing are associated (or correlated) with Transportation Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportation Portfolio has no effect on the direction of Retailing Portfolio i.e., Retailing Portfolio and Transportation Portfolio go up and down completely randomly.

Pair Corralation between Retailing Portfolio and Transportation Portfolio

Assuming the 90 days horizon Retailing Portfolio is expected to generate 1.11 times less return on investment than Transportation Portfolio. But when comparing it to its historical volatility, Retailing Portfolio Retailing is 1.41 times less risky than Transportation Portfolio. It trades about 0.11 of its potential returns per unit of risk. Transportation Portfolio Transportation is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,489  in Transportation Portfolio Transportation on May 8, 2025 and sell it today you would earn a total of  665.00  from holding Transportation Portfolio Transportation or generate 7.01% return on investment over 90 days.

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

Retailing Portfolio Retailing  vs.  Transportation Portfolio Trans

Retailing Portfolio

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Retailing Portfolio Retailing are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Retailing Portfolio may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Transportation Portfolio

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Transportation Portfolio Transportation are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Transportation Portfolio may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Retailing Portfolio and Transportation Portfolio

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

The idea behind Retailing Portfolio Retailing and Transportation Portfolio Transportation 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.