Correlation Between BOS Better and Talen Energy

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

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

Diversification Opportunities for BOS Better and Talen Energy

0.77

Correlation Coefficient

BOS Better  Talen Energy

Poor diversification

The 3 months correlation between BOS and Talen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BOS Better Online and Talen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talen Energy and BOS Better 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 BOS Better Online are associated (or correlated) with Talen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talen Energy has no effect on the direction of BOS Better i.e., BOS Better and Talen Energy go up and down completely randomly.

Pair Corralation between BOS Better and Talen Energy

Given the investment horizon of 90 days BOS Better is expected to generate 2.55 times less return on investment than Talen Energy. In addition to that, BOS Better is 1.08 times more volatile than Talen Energy. It trades about 0.06 of its total potential returns per unit of risk. Talen Energy is currently generating about 0.17 per unit of volatility. If you would invest  4,650  in Talen Energy on October 9, 2024 and sell it today you would earn a total of  16,909  from holding Talen Energy or generate 363.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.85%
Values	Daily Returns

BOS Better Online  vs.  Talen Energy

BOS Better Online

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BOS Better Online are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, BOS Better exhibited solid returns over the last few months and may actually be approaching a breakup point.

Talen Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Talen Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Talen Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BOS Better and Talen Energy

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

The idea behind BOS Better Online and Talen Energy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.