Correlation Between Braille Energy and Therma Bright

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

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

Diversification Opportunities for Braille Energy and Therma Bright

0.24

Correlation Coefficient

Braille Energy  Therma Bright

Modest diversification

The 3 months correlation between Braille and Therma is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Braille Energy Systems and Therma Bright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Therma Bright and Braille Energy 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 Braille Energy Systems are associated (or correlated) with Therma Bright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Therma Bright has no effect on the direction of Braille Energy i.e., Braille Energy and Therma Bright go up and down completely randomly.

Pair Corralation between Braille Energy and Therma Bright

Assuming the 90 days horizon Braille Energy is expected to generate 1.58 times less return on investment than Therma Bright. But when comparing it to its historical volatility, Braille Energy Systems is 1.66 times less risky than Therma Bright. It trades about 0.05 of its potential returns per unit of risk. Therma Bright is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Therma Bright on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Therma Bright or generate 0.0% return on investment over 90 days.

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

Braille Energy Systems  vs.  Therma Bright

Braille Energy Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Braille Energy Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Braille Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Therma Bright

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Therma Bright are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Therma Bright showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Braille Energy and Therma Bright

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

The idea behind Braille Energy Systems and Therma Bright 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.