Correlation Between ABL and TNB

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

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

Diversification Opportunities for ABL and TNB

0.0

Correlation Coefficient

ABL  TNB

Pay attention - limited upside

The 3 months correlation between ABL and TNB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ABL and TNB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TNB and ABL 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 ABL are associated (or correlated) with TNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TNB has no effect on the direction of ABL i.e., ABL and TNB go up and down completely randomly.

Pair Corralation between ABL and TNB

If you would invest (100.00) in ABL on November 27, 2024 and sell it today you would earn a total of  100.00  from holding ABL or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

ABL  vs.  TNB

ABL

Risk-Adjusted Performance

Very Weak

Over the last 90 days ABL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, ABL is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

TNB

Risk-Adjusted Performance

Very Weak

Over the last 90 days TNB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, TNB is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ABL and TNB

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

The idea behind ABL and TNB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.