Correlation Between ATCO and Tidewater Renewables

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

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

Diversification Opportunities for ATCO and Tidewater Renewables

0.33

Correlation Coefficient

ATCO  Tidewater Renewables

Weak diversification

The 3 months correlation between ATCO and Tidewater is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding ATCO and Tidewater Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidewater Renewables and ATCO 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 ATCO are associated (or correlated) with Tidewater Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidewater Renewables has no effect on the direction of ATCO i.e., ATCO and Tidewater Renewables go up and down completely randomly.

Pair Corralation between ATCO and Tidewater Renewables

Assuming the 90 days trading horizon ATCO is expected to generate 101.0 times less return on investment than Tidewater Renewables. But when comparing it to its historical volatility, ATCO is 19.14 times less risky than Tidewater Renewables. It trades about 0.02 of its potential returns per unit of risk. Tidewater Renewables is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  98.00  in Tidewater Renewables on December 3, 2024 and sell it today you would earn a total of  65.00  from holding Tidewater Renewables or generate 66.33% return on investment over 90 days.

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

ATCO  vs.  Tidewater Renewables

ATCO

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ATCO are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ATCO is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Tidewater Renewables

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tidewater Renewables are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Tidewater Renewables displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATCO and Tidewater Renewables

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

The idea behind ATCO and Tidewater Renewables 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.