Correlation Between Atlantic Energy and TransAKT

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

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

Diversification Opportunities for Atlantic Energy and TransAKT

-0.21

Correlation Coefficient

Atlantic Energy  TransAKT

Very good diversification

The 3 months correlation between Atlantic and TransAKT is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic Energy Solutions and TransAKT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAKT and Atlantic Energy 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 Atlantic Energy Solutions are associated (or correlated) with TransAKT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAKT has no effect on the direction of Atlantic Energy i.e., Atlantic Energy and TransAKT go up and down completely randomly.

Pair Corralation between Atlantic Energy and TransAKT

Given the investment horizon of 90 days Atlantic Energy is expected to generate 8.66 times less return on investment than TransAKT. But when comparing it to its historical volatility, Atlantic Energy Solutions is 6.39 times less risky than TransAKT. It trades about 0.08 of its potential returns per unit of risk. TransAKT is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.01  in TransAKT on September 4, 2024 and sell it today you would earn a total of  1.76  from holding TransAKT or generate 174.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Atlantic Energy Solutions  vs.  TransAKT

Atlantic Energy Solutions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantic Energy Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Atlantic Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

TransAKT

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TransAKT are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward-looking signals, TransAKT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Atlantic Energy and TransAKT

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

The idea behind Atlantic Energy Solutions and TransAKT 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.