Correlation Between Vanguard High and Tethys Petroleum

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

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

Diversification Opportunities for Vanguard High and Tethys Petroleum

0.72

Correlation Coefficient

Vanguard High  Tethys Petroleum

Poor diversification

The 3 months correlation between Vanguard and Tethys is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Dividend and Tethys Petroleum Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tethys Petroleum and Vanguard High 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 Vanguard High Dividend are associated (or correlated) with Tethys Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tethys Petroleum has no effect on the direction of Vanguard High i.e., Vanguard High and Tethys Petroleum go up and down completely randomly.

Pair Corralation between Vanguard High and Tethys Petroleum

Considering the 90-day investment horizon Vanguard High is expected to generate 8.96 times less return on investment than Tethys Petroleum. But when comparing it to its historical volatility, Vanguard High Dividend is 10.24 times less risky than Tethys Petroleum. It trades about 0.09 of its potential returns per unit of risk. Tethys Petroleum Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Tethys Petroleum Limited on January 19, 2024 and sell it today you would earn a total of  11.00  from holding Tethys Petroleum Limited or generate 21.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Vanguard High Dividend  vs.  Tethys Petroleum Limited

Vanguard High Dividend

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard High Dividend are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard High is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Tethys Petroleum

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tethys Petroleum Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical indicators, Tethys Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard High and Tethys Petroleum

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

The idea behind Vanguard High Dividend and Tethys Petroleum Limited 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.