Correlation Between Energy Absolute and TOA PAINT

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

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

Diversification Opportunities for Energy Absolute and TOA PAINT

0.72

Correlation Coefficient

Energy Absolute  TOA PAINT

Poor diversification

The 3 months correlation between Energy and TOA is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Energy Absolute Public and TOA PAINT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOA PAINT and Energy Absolute 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 Energy Absolute Public are associated (or correlated) with TOA PAINT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOA PAINT has no effect on the direction of Energy Absolute i.e., Energy Absolute and TOA PAINT go up and down completely randomly.

Pair Corralation between Energy Absolute and TOA PAINT

Assuming the 90 days horizon Energy Absolute Public is expected to generate 1.15 times more return on investment than TOA PAINT. However, Energy Absolute is 1.15 times more volatile than TOA PAINT. It trades about -0.09 of its potential returns per unit of risk. TOA PAINT is currently generating about -0.15 per unit of risk. If you would invest  810.00  in Energy Absolute Public on September 13, 2024 and sell it today you would lose (285.00) from holding Energy Absolute Public or give up 35.19% of portfolio value over 90 days.

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

Energy Absolute Public  vs.  TOA PAINT

Energy Absolute Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Absolute Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

TOA PAINT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOA PAINT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Energy Absolute and TOA PAINT

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

The idea behind Energy Absolute Public and TOA PAINT 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.