Correlation Between TECO Electric and Solid State

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

By analyzing existing cross correlation between TECO Electric Machinery and Solid State System, you can compare the effects of market volatilities on TECO Electric and Solid State 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 TECO Electric with a short position of Solid State. Check out your portfolio center. Please also check ongoing floating volatility patterns of TECO Electric and Solid State.

Diversification Opportunities for TECO Electric and Solid State

-0.24

Correlation Coefficient

TECO Electric  Solid State

Very good diversification

The 3 months correlation between TECO and Solid is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding TECO Electric Machinery and Solid State System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid State System and TECO Electric 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 TECO Electric Machinery are associated (or correlated) with Solid State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid State System has no effect on the direction of TECO Electric i.e., TECO Electric and Solid State go up and down completely randomly.

Pair Corralation between TECO Electric and Solid State

Assuming the 90 days trading horizon TECO Electric Machinery is expected to generate 0.73 times more return on investment than Solid State. However, TECO Electric Machinery is 1.36 times less risky than Solid State. It trades about 0.16 of its potential returns per unit of risk. Solid State System is currently generating about -0.03 per unit of risk. If you would invest  4,605  in TECO Electric Machinery on September 4, 2024 and sell it today you would earn a total of  735.00  from holding TECO Electric Machinery or generate 15.96% return on investment over 90 days.

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

TECO Electric Machinery  vs.  Solid State System

TECO Electric Machinery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TECO Electric Machinery are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TECO Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Solid State System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid State System has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Solid State is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with TECO Electric and Solid State

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

The idea behind TECO Electric Machinery and Solid State System 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.