Correlation Between Elentec Co and TSI Co

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

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

Diversification Opportunities for Elentec Co and TSI Co

0.94

Correlation Coefficient

Elentec Co  TSI Co

Almost no diversification

The 3 months correlation between Elentec and TSI is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Elentec Co and TSI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TSI Co and Elentec Co 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 Elentec Co are associated (or correlated) with TSI Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TSI Co has no effect on the direction of Elentec Co i.e., Elentec Co and TSI Co go up and down completely randomly.

Pair Corralation between Elentec Co and TSI Co

Assuming the 90 days trading horizon Elentec Co is expected to generate 1.23 times more return on investment than TSI Co. However, Elentec Co is 1.23 times more volatile than TSI Co. It trades about -0.07 of its potential returns per unit of risk. TSI Co is currently generating about -0.11 per unit of risk. If you would invest  769,000  in Elentec Co on September 23, 2024 and sell it today you would lose (262,000) from holding Elentec Co or give up 34.07% of portfolio value over 90 days.

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

Elentec Co  vs.  TSI Co

Elentec Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elentec Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

TSI Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TSI Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Elentec Co and TSI Co

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

The idea behind Elentec Co and TSI Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.