Correlation Between Turning Point and Talen Energy

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

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

Diversification Opportunities for Turning Point and Talen Energy

0.9

Correlation Coefficient

Turning Point  Talen Energy

Almost no diversification

The 3 months correlation between Turning and Talen is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Turning Point Brands and Talen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talen Energy and Turning Point 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 Turning Point Brands are associated (or correlated) with Talen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talen Energy has no effect on the direction of Turning Point i.e., Turning Point and Talen Energy go up and down completely randomly.

Pair Corralation between Turning Point and Talen Energy

Considering the 90-day investment horizon Turning Point Brands is expected to generate 0.62 times more return on investment than Talen Energy. However, Turning Point Brands is 1.6 times less risky than Talen Energy. It trades about 0.26 of its potential returns per unit of risk. Talen Energy is currently generating about 0.09 per unit of risk. If you would invest  4,310  in Turning Point Brands on September 28, 2024 and sell it today you would earn a total of  1,656  from holding Turning Point Brands or generate 38.42% return on investment over 90 days.

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

Turning Point Brands  vs.  Talen Energy

Turning Point Brands

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Turning Point Brands are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Turning Point sustained solid returns over the last few months and may actually be approaching a breakup point.

Talen Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Talen Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Talen Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Turning Point and Talen Energy

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

The idea behind Turning Point Brands and Talen 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.