Correlation Between Trimble and TerraCom

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

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

Diversification Opportunities for Trimble and TerraCom

-0.73

Correlation Coefficient

Trimble  TerraCom

Pay attention - limited upside

The 3 months correlation between Trimble and TerraCom is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and TerraCom Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TerraCom Limited and Trimble 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 Trimble are associated (or correlated) with TerraCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TerraCom Limited has no effect on the direction of Trimble i.e., Trimble and TerraCom go up and down completely randomly.

Pair Corralation between Trimble and TerraCom

Given the investment horizon of 90 days Trimble is expected to generate 0.09 times more return on investment than TerraCom. However, Trimble is 10.96 times less risky than TerraCom. It trades about -0.07 of its potential returns per unit of risk. TerraCom Limited is currently generating about -0.12 per unit of risk. If you would invest  6,209  in Trimble on July 30, 2024 and sell it today you would lose (119.00) from holding Trimble or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	23.81%
Values	Daily Returns

Trimble  vs.  TerraCom Limited

Trimble

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal primary indicators, Trimble may actually be approaching a critical reversion point that can send shares even higher in November 2024.

TerraCom Limited

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days TerraCom Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak fundamental indicators, TerraCom reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trimble and TerraCom

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

The idea behind Trimble and TerraCom 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.