Correlation Between TBI Motion and Advanced Ceramic

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

By analyzing existing cross correlation between TBI Motion Technology and Advanced Ceramic X, you can compare the effects of market volatilities on TBI Motion and Advanced Ceramic 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 TBI Motion with a short position of Advanced Ceramic. Check out your portfolio center. Please also check ongoing floating volatility patterns of TBI Motion and Advanced Ceramic.

Diversification Opportunities for TBI Motion and Advanced Ceramic

0.2

Correlation Coefficient

TBI Motion  Advanced Ceramic

Modest diversification

The 3 months correlation between TBI and Advanced is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding TBI Motion Technology and Advanced Ceramic X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Ceramic X and TBI Motion 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 TBI Motion Technology are associated (or correlated) with Advanced Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Ceramic X has no effect on the direction of TBI Motion i.e., TBI Motion and Advanced Ceramic go up and down completely randomly.

Pair Corralation between TBI Motion and Advanced Ceramic

Assuming the 90 days trading horizon TBI Motion Technology is expected to generate 1.39 times more return on investment than Advanced Ceramic. However, TBI Motion is 1.39 times more volatile than Advanced Ceramic X. It trades about 0.11 of its potential returns per unit of risk. Advanced Ceramic X is currently generating about 0.03 per unit of risk. If you would invest  4,220  in TBI Motion Technology on September 16, 2024 and sell it today you would earn a total of  1,030  from holding TBI Motion Technology or generate 24.41% return on investment over 90 days.

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

TBI Motion Technology  vs.  Advanced Ceramic X

TBI Motion Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TBI Motion Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TBI Motion showed solid returns over the last few months and may actually be approaching a breakup point.

Advanced Ceramic X

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Ceramic X are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Advanced Ceramic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with TBI Motion and Advanced Ceramic

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

The idea behind TBI Motion Technology and Advanced Ceramic X 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.