Correlation Between TNB and MWAT

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

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

Diversification Opportunities for TNB and MWAT

0.61

Correlation Coefficient

TNB  MWAT

Poor diversification

The 3 months correlation between TNB and MWAT is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding TNB and MWAT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MWAT and TNB 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 TNB are associated (or correlated) with MWAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MWAT has no effect on the direction of TNB i.e., TNB and MWAT go up and down completely randomly.

Pair Corralation between TNB and MWAT

If you would invest  0.01  in TNB on September 1, 2024 and sell it today you would earn a total of  0.00  from holding TNB or generate 67.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

TNB  vs.  MWAT

TNB

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TNB are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, TNB exhibited solid returns over the last few months and may actually be approaching a breakup point.

MWAT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with TNB and MWAT

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

The idea behind TNB and MWAT 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..