Correlation Between Audius and TNB

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

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

Diversification Opportunities for Audius and TNB

0.66

Correlation Coefficient

Audius  TNB

Poor diversification

The 3 months correlation between Audius and TNB is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Audius and TNB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TNB and Audius 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 Audius are associated (or correlated) with TNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TNB has no effect on the direction of Audius i.e., Audius and TNB go up and down completely randomly.

Pair Corralation between Audius and TNB

Assuming the 90 days trading horizon Audius is expected to under-perform the TNB. In addition to that, Audius is 2.43 times more volatile than TNB. It trades about -0.24 of its total potential returns per unit of risk. TNB is currently generating about -0.05 per unit of volatility. If you would invest  0.01  in TNB on January 30, 2024 and sell it today you would lose  0.00  from holding TNB or give up 3.39% of portfolio value over 90 days.

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

Audius  vs.  TNB

Audius

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Audius are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Audius may actually be approaching a critical reversion point that can send shares even higher in May 2024.

TNB

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TNB are ranked lower than 15 (%) 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.

Pair Trading with Audius and TNB

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

The idea behind Audius and TNB 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.