Correlation Between Therma Bright and Braille Energy

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

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

Diversification Opportunities for Therma Bright and Braille Energy

0.63

Correlation Coefficient

Therma Bright  Braille Energy

Poor diversification

The 3 months correlation between Therma and Braille is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Therma Bright and Braille Energy Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braille Energy Systems and Therma Bright 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 Therma Bright are associated (or correlated) with Braille Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braille Energy Systems has no effect on the direction of Therma Bright i.e., Therma Bright and Braille Energy go up and down completely randomly.

Pair Corralation between Therma Bright and Braille Energy

Assuming the 90 days trading horizon Therma Bright is expected to under-perform the Braille Energy. In addition to that, Therma Bright is 1.84 times more volatile than Braille Energy Systems. It trades about -0.11 of its total potential returns per unit of risk. Braille Energy Systems is currently generating about -0.02 per unit of volatility. If you would invest  7.50  in Braille Energy Systems on September 2, 2024 and sell it today you would lose (1.00) from holding Braille Energy Systems or give up 13.33% of portfolio value over 90 days.

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

Therma Bright  vs.  Braille Energy Systems

Therma Bright

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Therma Bright has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Braille Energy Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Braille Energy Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Braille Energy 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 Therma Bright and Braille Energy

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

The idea behind Therma Bright and Braille Energy Systems 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.