Correlation Between Thermal Energy and CHAR Technologies

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

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

Diversification Opportunities for Thermal Energy and CHAR Technologies

0.64

Correlation Coefficient

Thermal Energy  CHAR Technologies

Poor diversification

The 3 months correlation between Thermal and CHAR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Thermal Energy International and CHAR Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAR Technologies and Thermal Energy 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 Thermal Energy International are associated (or correlated) with CHAR Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAR Technologies has no effect on the direction of Thermal Energy i.e., Thermal Energy and CHAR Technologies go up and down completely randomly.

Pair Corralation between Thermal Energy and CHAR Technologies

Assuming the 90 days horizon Thermal Energy International is expected to under-perform the CHAR Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Thermal Energy International is 1.27 times less risky than CHAR Technologies. The stock trades about -0.09 of its potential returns per unit of risk. The CHAR Technologies is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  24.00  in CHAR Technologies on September 5, 2024 and sell it today you would lose (4.00) from holding CHAR Technologies or give up 16.67% of portfolio value over 90 days.

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

Thermal Energy International  vs.  CHAR Technologies

Thermal Energy Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermal Energy International 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.

CHAR Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHAR Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Thermal Energy and CHAR Technologies

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

The idea behind Thermal Energy International and CHAR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..