Correlation Between TECO Electric and Ruentex Development

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

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

Diversification Opportunities for TECO Electric and Ruentex Development

-0.76

Correlation Coefficient

TECO Electric  Ruentex Development

Pay attention - limited upside

The 3 months correlation between TECO and Ruentex is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding TECO Electric Machinery and Ruentex Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Development and TECO Electric 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 TECO Electric Machinery are associated (or correlated) with Ruentex Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Development has no effect on the direction of TECO Electric i.e., TECO Electric and Ruentex Development go up and down completely randomly.

Pair Corralation between TECO Electric and Ruentex Development

Assuming the 90 days trading horizon TECO Electric is expected to generate 1.43 times less return on investment than Ruentex Development. But when comparing it to its historical volatility, TECO Electric Machinery is 1.04 times less risky than Ruentex Development. It trades about 0.03 of its potential returns per unit of risk. Ruentex Development Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,625  in Ruentex Development Co on September 20, 2024 and sell it today you would earn a total of  740.00  from holding Ruentex Development Co or generate 20.41% return on investment over 90 days.

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

TECO Electric Machinery  vs.  Ruentex Development Co

TECO Electric Machinery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TECO Electric Machinery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TECO Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with TECO Electric and Ruentex Development

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

The idea behind TECO Electric Machinery and Ruentex Development 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.