Correlation Between Doman Building and Topaz Energy

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

By analyzing existing cross correlation between Doman Building Materials and Topaz Energy Corp, you can compare the effects of market volatilities on Doman Building and Topaz 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 Doman Building with a short position of Topaz Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doman Building and Topaz Energy.

Diversification Opportunities for Doman Building and Topaz Energy

0.65

Correlation Coefficient

Doman Building  Topaz Energy

Poor diversification

The 3 months correlation between Doman and Topaz is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Doman Building Materials and Topaz Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topaz Energy Corp and Doman Building 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 Doman Building Materials are associated (or correlated) with Topaz Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topaz Energy Corp has no effect on the direction of Doman Building i.e., Doman Building and Topaz Energy go up and down completely randomly.

Pair Corralation between Doman Building and Topaz Energy

Assuming the 90 days trading horizon Doman Building is expected to generate 8.08 times less return on investment than Topaz Energy. In addition to that, Doman Building is 1.33 times more volatile than Topaz Energy Corp. It trades about 0.0 of its total potential returns per unit of risk. Topaz Energy Corp is currently generating about 0.03 per unit of volatility. If you would invest  2,062  in Topaz Energy Corp on December 5, 2024 and sell it today you would earn a total of  295.00  from holding Topaz Energy Corp or generate 14.31% return on investment over 90 days.

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

Doman Building Materials  vs.  Topaz Energy Corp

Doman Building Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Doman Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Topaz Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Topaz Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Doman Building and Topaz Energy

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

The idea behind Doman Building Materials and Topaz Energy Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.