Correlation Between Therma Bright and Covalon Technologies

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

By analyzing existing cross correlation between Therma Bright and Covalon Technologies, you can compare the effects of market volatilities on Therma Bright and Covalon Technologies 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 Covalon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Therma Bright and Covalon Technologies.

Diversification Opportunities for Therma Bright and Covalon Technologies

-0.76

Correlation Coefficient

Therma Bright  Covalon Technologies

Pay attention - limited upside

The 3 months correlation between Therma and Covalon is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Therma Bright and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies 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 Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of Therma Bright i.e., Therma Bright and Covalon Technologies go up and down completely randomly.

Pair Corralation between Therma Bright and Covalon Technologies

Assuming the 90 days trading horizon Therma Bright is expected to under-perform the Covalon Technologies. In addition to that, Therma Bright is 2.4 times more volatile than Covalon Technologies. It trades about -0.07 of its total potential returns per unit of risk. Covalon Technologies is currently generating about 0.1 per unit of volatility. If you would invest  340.00  in Covalon Technologies on September 1, 2024 and sell it today you would earn a total of  25.00  from holding Covalon Technologies or generate 7.35% return on investment over 90 days.

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

Therma Bright  vs.  Covalon Technologies

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 December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Covalon Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covalon Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Covalon Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Therma Bright and Covalon Technologies

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

The idea behind Therma Bright and Covalon Technologies 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.