Correlation Between Tokyo Electric and Ocean Thermal

Can any of the company-specific risk be diversified away by investing in both Tokyo Electric and Ocean Thermal 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 Ocean Thermal 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 Ocean Thermal Energy, you can compare the effects of market volatilities on Tokyo Electric and Ocean Thermal 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 Ocean Thermal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electric and Ocean Thermal.

Diversification Opportunities for Tokyo Electric and Ocean Thermal

0.14

Correlation Coefficient

Tokyo Electric  Ocean Thermal

Average diversification

The 3 months correlation between Tokyo and Ocean is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electric Power and Ocean Thermal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Thermal Energy 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 Ocean Thermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Thermal Energy has no effect on the direction of Tokyo Electric i.e., Tokyo Electric and Ocean Thermal go up and down completely randomly.

Pair Corralation between Tokyo Electric and Ocean Thermal

If you would invest  0.80  in Ocean Thermal Energy on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Ocean Thermal Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Tokyo Electric Power  vs.  Ocean Thermal Energy

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.

Ocean Thermal Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean Thermal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Ocean Thermal is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Tokyo Electric and Ocean Thermal

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

The idea behind Tokyo Electric Power and Ocean Thermal Energy 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.