Correlation Between Entergy New and TOMI Environmental

Can any of the company-specific risk be diversified away by investing in both Entergy New and TOMI Environmental 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 Entergy New and TOMI Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Entergy New Orleans and TOMI Environmental Solutions, you can compare the effects of market volatilities on Entergy New and TOMI Environmental 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 Entergy New with a short position of TOMI Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy New and TOMI Environmental.

Diversification Opportunities for Entergy New and TOMI Environmental

-0.64

Correlation Coefficient

Entergy New  TOMI Environmental

Excellent diversification

The 3 months correlation between Entergy and TOMI is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Entergy New Orleans and TOMI Environmental Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOMI Environmental and Entergy New 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 Entergy New Orleans are associated (or correlated) with TOMI Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOMI Environmental has no effect on the direction of Entergy New i.e., Entergy New and TOMI Environmental go up and down completely randomly.

Pair Corralation between Entergy New and TOMI Environmental

Considering the 90-day investment horizon Entergy New Orleans is expected to generate 0.23 times more return on investment than TOMI Environmental. However, Entergy New Orleans is 4.33 times less risky than TOMI Environmental. It trades about 0.2 of its potential returns per unit of risk. TOMI Environmental Solutions is currently generating about -0.12 per unit of risk. If you would invest  2,215  in Entergy New Orleans on December 2, 2024 and sell it today you would earn a total of  52.00  from holding Entergy New Orleans or generate 2.35% return on investment over 90 days.

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

Entergy New Orleans  vs.  TOMI Environmental Solutions

Entergy New Orleans

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entergy New Orleans has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Entergy New is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TOMI Environmental

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TOMI Environmental Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, TOMI Environmental showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entergy New and TOMI Environmental

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

The idea behind Entergy New Orleans and TOMI Environmental Solutions 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.