Correlation Between Arbor Metals and TC Energy

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

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

Diversification Opportunities for Arbor Metals and TC Energy

0.06

Correlation Coefficient

Arbor Metals  TC Energy

Significant diversification

The 3 months correlation between Arbor and TRP-PF is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Metals Corp and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp and Arbor Metals 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 Arbor Metals Corp are associated (or correlated) with TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Arbor Metals i.e., Arbor Metals and TC Energy go up and down completely randomly.

Pair Corralation between Arbor Metals and TC Energy

Assuming the 90 days horizon Arbor Metals Corp is expected to generate 13.62 times more return on investment than TC Energy. However, Arbor Metals is 13.62 times more volatile than TC Energy Corp. It trades about 0.16 of its potential returns per unit of risk. TC Energy Corp is currently generating about 0.21 per unit of risk. If you would invest  39.00  in Arbor Metals Corp on October 24, 2024 and sell it today you would earn a total of  45.00  from holding Arbor Metals Corp or generate 115.38% return on investment over 90 days.

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

Arbor Metals Corp  vs.  TC Energy Corp

Arbor Metals Corp

Risk-Adjusted Performance

12 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Metals Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arbor Metals showed solid returns over the last few months and may actually be approaching a breakup point.

TC Energy Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, TC Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Arbor Metals and TC Energy

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

The idea behind Arbor Metals Corp and TC Energy Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.