Correlation Between Tplex and Ecoplastic

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

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

Diversification Opportunities for Tplex and Ecoplastic

0.33

Correlation Coefficient

Tplex  Ecoplastic

Weak diversification

The 3 months correlation between Tplex and Ecoplastic is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tplex Co and Ecoplastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecoplastic and Tplex 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 Tplex Co are associated (or correlated) with Ecoplastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecoplastic has no effect on the direction of Tplex i.e., Tplex and Ecoplastic go up and down completely randomly.

Pair Corralation between Tplex and Ecoplastic

Assuming the 90 days trading horizon Tplex is expected to generate 7.13 times less return on investment than Ecoplastic. But when comparing it to its historical volatility, Tplex Co is 1.15 times less risky than Ecoplastic. It trades about 0.01 of its potential returns per unit of risk. Ecoplastic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  229,000  in Ecoplastic on December 30, 2024 and sell it today you would earn a total of  16,500  from holding Ecoplastic or generate 7.21% return on investment over 90 days.

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

Tplex Co  vs.  Ecoplastic

Tplex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tplex Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tplex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ecoplastic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ecoplastic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ecoplastic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tplex and Ecoplastic

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

The idea behind Tplex Co and Ecoplastic 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.