Correlation Between TPC Power and BANPU POWER

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

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

Diversification Opportunities for TPC Power and BANPU POWER

0.79

Correlation Coefficient

TPC Power  BANPU POWER

Poor diversification

The 3 months correlation between TPC and BANPU is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding TPC Power Holding and BANPU POWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANPU POWER and TPC Power 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 TPC Power Holding are associated (or correlated) with BANPU POWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANPU POWER has no effect on the direction of TPC Power i.e., TPC Power and BANPU POWER go up and down completely randomly.

Pair Corralation between TPC Power and BANPU POWER

Assuming the 90 days trading horizon TPC Power Holding is expected to under-perform the BANPU POWER. But the stock apears to be less risky and, when comparing its historical volatility, TPC Power Holding is 2.23 times less risky than BANPU POWER. The stock trades about -0.38 of its potential returns per unit of risk. The BANPU POWER is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  1,440  in BANPU POWER on September 24, 2024 and sell it today you would lose (350.00) from holding BANPU POWER or give up 24.31% of portfolio value over 90 days.

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

TPC Power Holding  vs.  BANPU POWER

TPC Power Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPC Power Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

BANPU POWER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANPU POWER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with TPC Power and BANPU POWER

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

The idea behind TPC Power Holding and BANPU POWER 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .