Correlation Between TCL Electronics and GoPro

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

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

Diversification Opportunities for TCL Electronics and GoPro

0.23

Correlation Coefficient

TCL Electronics  GoPro

Modest diversification

The 3 months correlation between TCL and GoPro is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding TCL Electronics Holdings and GoPro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoPro Inc and TCL Electronics 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 TCL Electronics Holdings are associated (or correlated) with GoPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoPro Inc has no effect on the direction of TCL Electronics i.e., TCL Electronics and GoPro go up and down completely randomly.

Pair Corralation between TCL Electronics and GoPro

Assuming the 90 days horizon TCL Electronics Holdings is expected to generate 1.33 times more return on investment than GoPro. However, TCL Electronics is 1.33 times more volatile than GoPro Inc. It trades about 0.09 of its potential returns per unit of risk. GoPro Inc is currently generating about -0.03 per unit of risk. If you would invest  66.00  in TCL Electronics Holdings on September 18, 2024 and sell it today you would earn a total of  4.00  from holding TCL Electronics Holdings or generate 6.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

TCL Electronics Holdings  vs.  GoPro Inc

TCL Electronics Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TCL Electronics Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, TCL Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

GoPro Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoPro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with TCL Electronics and GoPro

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

The idea behind TCL Electronics Holdings and GoPro Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.