Correlation Between Baker Steel and Tlou Energy

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

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

Diversification Opportunities for Baker Steel and Tlou Energy

-0.57

Correlation Coefficient

Baker Steel  Tlou Energy

Excellent diversification

The 3 months correlation between Baker and Tlou is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and Tlou Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tlou Energy and Baker Steel 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 Baker Steel Resources are associated (or correlated) with Tlou Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tlou Energy has no effect on the direction of Baker Steel i.e., Baker Steel and Tlou Energy go up and down completely randomly.

Pair Corralation between Baker Steel and Tlou Energy

Assuming the 90 days trading horizon Baker Steel Resources is expected to generate 0.75 times more return on investment than Tlou Energy. However, Baker Steel Resources is 1.33 times less risky than Tlou Energy. It trades about 0.18 of its potential returns per unit of risk. Tlou Energy is currently generating about -0.02 per unit of risk. If you would invest  5,050  in Baker Steel Resources on October 7, 2024 and sell it today you would earn a total of  750.00  from holding Baker Steel Resources or generate 14.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.68%
Values	Daily Returns

Baker Steel Resources  vs.  Tlou Energy

Baker Steel Resources

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Steel Resources are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Baker Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tlou Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tlou Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Baker Steel and Tlou Energy

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

The idea behind Baker Steel Resources and Tlou 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.