Correlation Between TLOS and NKN

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

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

Diversification Opportunities for TLOS and NKN

-0.35

Correlation Coefficient

TLOS  NKN

Very good diversification

The 3 months correlation between TLOS and NKN is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding TLOS and NKN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NKN and TLOS 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 TLOS are associated (or correlated) with NKN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NKN has no effect on the direction of TLOS i.e., TLOS and NKN go up and down completely randomly.

Pair Corralation between TLOS and NKN

Assuming the 90 days trading horizon TLOS is expected to under-perform the NKN. In addition to that, TLOS is 1.0 times more volatile than NKN. It trades about -0.02 of its total potential returns per unit of risk. NKN is currently generating about 0.21 per unit of volatility. If you would invest  6.50  in NKN on September 2, 2024 and sell it today you would earn a total of  5.50  from holding NKN or generate 84.62% return on investment over 90 days.

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

TLOS  vs.  NKN

TLOS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TLOS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, TLOS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

NKN

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NKN are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, NKN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TLOS and NKN

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

The idea behind TLOS and NKN 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.