Correlation Between TPI Polene and Electricity Generating

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

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

Diversification Opportunities for TPI Polene and Electricity Generating

0.15

Correlation Coefficient

TPI Polene  Electricity Generating

Average diversification

The 3 months correlation between TPI and Electricity is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding TPI Polene Power and Electricity Generating Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electricity Generating and TPI Polene 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 TPI Polene Power are associated (or correlated) with Electricity Generating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electricity Generating has no effect on the direction of TPI Polene i.e., TPI Polene and Electricity Generating go up and down completely randomly.

Pair Corralation between TPI Polene and Electricity Generating

Assuming the 90 days trading horizon TPI Polene Power is expected to under-perform the Electricity Generating. But the stock apears to be less risky and, when comparing its historical volatility, TPI Polene Power is 1.64 times less risky than Electricity Generating. The stock trades about -0.05 of its potential returns per unit of risk. The Electricity Generating Public is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  12,300  in Electricity Generating Public on September 16, 2024 and sell it today you would lose (150.00) from holding Electricity Generating Public or give up 1.22% of portfolio value over 90 days.

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

TPI Polene Power  vs.  Electricity Generating Public

TPI Polene Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPI Polene Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, TPI Polene is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Electricity Generating

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electricity Generating Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Electricity Generating is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with TPI Polene and Electricity Generating

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

The idea behind TPI Polene Power and Electricity Generating Public 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.