Correlation Between Tokyo Electric and Advent Technologies

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

By analyzing existing cross correlation between Tokyo Electric Power and Advent Technologies Holdings, you can compare the effects of market volatilities on Tokyo Electric and Advent 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 Tokyo Electric with a short position of Advent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electric and Advent Technologies.

Diversification Opportunities for Tokyo Electric and Advent Technologies

-0.67

Correlation Coefficient

Tokyo Electric  Advent Technologies

Excellent diversification

The 3 months correlation between Tokyo and Advent is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electric Power and Advent Technologies Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Technologies and Tokyo Electric 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 Tokyo Electric Power are associated (or correlated) with Advent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Technologies has no effect on the direction of Tokyo Electric i.e., Tokyo Electric and Advent Technologies go up and down completely randomly.

Pair Corralation between Tokyo Electric and Advent Technologies

Assuming the 90 days horizon Tokyo Electric Power is expected to under-perform the Advent Technologies. But the pink sheet apears to be less risky and, when comparing its historical volatility, Tokyo Electric Power is 4.35 times less risky than Advent Technologies. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Advent Technologies Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  250.00  in Advent Technologies Holdings on August 31, 2024 and sell it today you would earn a total of  281.00  from holding Advent Technologies Holdings or generate 112.4% return on investment over 90 days.

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

Tokyo Electric Power  vs.  Advent Technologies Holdings

Tokyo Electric Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyo Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Advent Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Technologies Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Advent Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tokyo Electric and Advent Technologies

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

The idea behind Tokyo Electric Power and Advent Technologies Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.