Correlation Between TomCo Energy and FT Cboe

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

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

Diversification Opportunities for TomCo Energy and FT Cboe

-0.74

Correlation Coefficient

TomCo Energy  FT Cboe

Pay attention - limited upside

The 3 months correlation between TomCo and KNG is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding TomCo Energy Plc and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest and TomCo 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 TomCo Energy Plc are associated (or correlated) with FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of TomCo Energy i.e., TomCo Energy and FT Cboe go up and down completely randomly.

Pair Corralation between TomCo Energy and FT Cboe

Assuming the 90 days horizon TomCo Energy Plc is expected to under-perform the FT Cboe. But the pink sheet apears to be less risky and, when comparing its historical volatility, TomCo Energy Plc is 2.27 times less risky than FT Cboe. The pink sheet trades about -0.22 of its potential returns per unit of risk. The FT Cboe Vest is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  5,237  in FT Cboe Vest on January 26, 2024 and sell it today you would lose (64.00) from holding FT Cboe Vest or give up 1.22% of portfolio value over 90 days.

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

TomCo Energy Plc  vs.  FT Cboe Vest

TomCo Energy Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TomCo Energy Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, TomCo Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

FT Cboe Vest

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FT Cboe is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TomCo Energy and FT Cboe

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

The idea behind TomCo Energy Plc and FT Cboe Vest 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.