Correlation Between TC Energy and Richards Packaging

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

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

Diversification Opportunities for TC Energy and Richards Packaging

-0.53

Correlation Coefficient

TC Energy  Richards Packaging

Excellent diversification

The 3 months correlation between TRP and Richards is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding TC Energy Corp and Richards Packaging Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richards Packaging Income and TC 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 TC Energy Corp are associated (or correlated) with Richards Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richards Packaging Income has no effect on the direction of TC Energy i.e., TC Energy and Richards Packaging go up and down completely randomly.

Pair Corralation between TC Energy and Richards Packaging

Assuming the 90 days trading horizon TC Energy Corp is expected to generate 1.15 times more return on investment than Richards Packaging. However, TC Energy is 1.15 times more volatile than Richards Packaging Income. It trades about -0.14 of its potential returns per unit of risk. Richards Packaging Income is currently generating about -0.19 per unit of risk. If you would invest  6,910  in TC Energy Corp on September 12, 2024 and sell it today you would lose (223.00) from holding TC Energy Corp or give up 3.23% of portfolio value over 90 days.

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

TC Energy Corp  vs.  Richards Packaging Income

TC Energy Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TC Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Richards Packaging Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Richards Packaging Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Richards Packaging is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TC Energy and Richards Packaging

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

The idea behind TC Energy Corp and Richards Packaging Income 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.