Correlation Between Electricity Generating and TPC Power

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

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

Diversification Opportunities for Electricity Generating and TPC Power

-0.78

Correlation Coefficient

Electricity Generating  TPC Power

Pay attention - limited upside

The 3 months correlation between Electricity and TPC is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Electricity Generating Public and TPC Power Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPC Power Holding and Electricity Generating 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 Electricity Generating Public are associated (or correlated) with TPC Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPC Power Holding has no effect on the direction of Electricity Generating i.e., Electricity Generating and TPC Power go up and down completely randomly.

Pair Corralation between Electricity Generating and TPC Power

Assuming the 90 days trading horizon Electricity Generating Public is expected to under-perform the TPC Power. But the stock apears to be less risky and, when comparing its historical volatility, Electricity Generating Public is 1.44 times less risky than TPC Power. The stock trades about -0.04 of its potential returns per unit of risk. The TPC Power Holding is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  915.00  in TPC Power Holding on January 29, 2024 and sell it today you would lose (205.00) from holding TPC Power Holding or give up 22.4% of portfolio value over 90 days.

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

Electricity Generating Public  vs.  TPC Power Holding

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

TPC Power Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TPC Power Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, TPC Power disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electricity Generating and TPC Power

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

The idea behind Electricity Generating Public and TPC Power Holding 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.