Correlation Between Energy Absolute and TPI Polene

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

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

Diversification Opportunities for Energy Absolute and TPI Polene

0.81

Correlation Coefficient

Energy Absolute  TPI Polene

Very poor diversification

The 3 months correlation between Energy and TPI is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Energy Absolute Public and TPI Polene Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPI Polene Public and Energy Absolute 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 Energy Absolute Public 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 Public has no effect on the direction of Energy Absolute i.e., Energy Absolute and TPI Polene go up and down completely randomly.

Pair Corralation between Energy Absolute and TPI Polene

Assuming the 90 days horizon Energy Absolute Public is expected to generate 4.0 times more return on investment than TPI Polene. However, Energy Absolute is 4.0 times more volatile than TPI Polene Public. It trades about -0.01 of its potential returns per unit of risk. TPI Polene Public is currently generating about -0.24 per unit of risk. If you would invest  349.00  in Energy Absolute Public on October 12, 2024 and sell it today you would lose (9.00) from holding Energy Absolute Public or give up 2.58% of portfolio value over 90 days.

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

Energy Absolute Public  vs.  TPI Polene Public

Energy Absolute Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Absolute Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

TPI Polene Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPI Polene Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Energy Absolute and TPI Polene

The main advantage of trading using opposite Energy Absolute and TPI Polene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Absolute 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 Energy Absolute Public and TPI Polene Public 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.