Correlation Between BTS Group and TPI Polene

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

By analyzing existing cross correlation between BTS Group Holdings and TPI Polene Power, you can compare the effects of market volatilities on BTS Group and TPI Polene 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 BTS Group with a short position of TPI Polene. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTS Group and TPI Polene.

Diversification Opportunities for BTS Group and TPI Polene

0.56

Correlation Coefficient

BTS Group  TPI Polene

Very weak diversification

The 3 months correlation between BTS and TPI is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding BTS Group Holdings and TPI Polene Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPI Polene Power and BTS Group 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 BTS Group Holdings are associated (or correlated) with TPI Polene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPI Polene Power has no effect on the direction of BTS Group i.e., BTS Group and TPI Polene go up and down completely randomly.

Pair Corralation between BTS Group and TPI Polene

Assuming the 90 days trading horizon BTS Group Holdings is expected to generate 1.45 times more return on investment than TPI Polene. However, BTS Group is 1.45 times more volatile than TPI Polene Power. It trades about -0.04 of its potential returns per unit of risk. TPI Polene Power is currently generating about -0.21 per unit of risk. If you would invest  610.00  in BTS Group Holdings on December 28, 2024 and sell it today you would lose (50.00) from holding BTS Group Holdings or give up 8.2% of portfolio value over 90 days.

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

BTS Group Holdings  vs.  TPI Polene Power

BTS Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days BTS Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

TPI Polene Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days TPI Polene Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BTS Group and TPI Polene

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

The idea behind BTS Group Holdings and TPI Polene Power 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.