Correlation Between True USD and THX

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

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

Diversification Opportunities for True USD and THX

0.0

Correlation Coefficient

True USD  THX

Pay attention - limited upside

The 3 months correlation between True and THX is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding True USD and THX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THX and True USD 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 True USD are associated (or correlated) with THX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THX has no effect on the direction of True USD i.e., True USD and THX go up and down completely randomly.

Pair Corralation between True USD and THX

Assuming the 90 days trading horizon True USD is expected to generate 0.07 times more return on investment than THX. However, True USD is 14.45 times less risky than THX. It trades about 0.0 of its potential returns per unit of risk. THX is currently generating about -0.05 per unit of risk. If you would invest  100.00  in True USD on January 27, 2024 and sell it today you would earn a total of  0.00  from holding True USD or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	70.57%
Values	Daily Returns

True USD  vs.  THX

True USD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in True USD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, True USD is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

THX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days THX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, THX is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with True USD and THX

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

The idea behind True USD and THX 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.