Correlation Between TES and INNOX Advanced

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

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

Diversification Opportunities for TES and INNOX Advanced

0.74

Correlation Coefficient

TES  INNOX Advanced

Poor diversification

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

Pair Corralation between TES and INNOX Advanced

Assuming the 90 days trading horizon TES Co is expected to generate 1.21 times more return on investment than INNOX Advanced. However, TES is 1.21 times more volatile than INNOX Advanced Materials. It trades about 0.21 of its potential returns per unit of risk. INNOX Advanced Materials is currently generating about 0.13 per unit of risk. If you would invest  1,553,475  in TES Co on December 23, 2024 and sell it today you would earn a total of  856,525  from holding TES Co or generate 55.14% return on investment over 90 days.

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

TES Co  vs.  INNOX Advanced Materials

TES Co

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TES Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TES sustained solid returns over the last few months and may actually be approaching a breakup point.

INNOX Advanced Materials

Risk-Adjusted Performance

OK

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

Pair Trading with TES and INNOX Advanced

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

The idea behind TES Co and INNOX Advanced Materials 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.