Correlation Between TF Bank and Arctic Blue

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

By analyzing existing cross correlation between TF Bank AB and Arctic Blue Beverages, you can compare the effects of market volatilities on TF Bank and Arctic Blue 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 TF Bank with a short position of Arctic Blue. Check out your portfolio center. Please also check ongoing floating volatility patterns of TF Bank and Arctic Blue.

Diversification Opportunities for TF Bank and Arctic Blue

-0.92

Correlation Coefficient

TF Bank  Arctic Blue

Pay attention - limited upside

The 3 months correlation between TFBANK and Arctic is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding TF Bank AB and Arctic Blue Beverages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Blue Beverages and TF Bank 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 TF Bank AB are associated (or correlated) with Arctic Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Blue Beverages has no effect on the direction of TF Bank i.e., TF Bank and Arctic Blue go up and down completely randomly.

Pair Corralation between TF Bank and Arctic Blue

Assuming the 90 days trading horizon TF Bank AB is expected to generate 0.76 times more return on investment than Arctic Blue. However, TF Bank AB is 1.31 times less risky than Arctic Blue. It trades about 0.17 of its potential returns per unit of risk. Arctic Blue Beverages is currently generating about -0.46 per unit of risk. If you would invest  32,400  in TF Bank AB on September 12, 2024 and sell it today you would earn a total of  2,600  from holding TF Bank AB or generate 8.02% return on investment over 90 days.

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

TF Bank AB  vs.  Arctic Blue Beverages

TF Bank AB

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TF Bank AB are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, TF Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Arctic Blue Beverages

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Blue Beverages has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators 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 TF Bank and Arctic Blue

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

The idea behind TF Bank AB and Arctic Blue Beverages 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.