Correlation Between Eastern Power and Thachang Green

Can any of the company-specific risk be diversified away by investing in both Eastern Power and Thachang Green 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 Eastern Power and Thachang Green into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Eastern Power and Thachang Green

0.84

Correlation Coefficient

Eastern Power  Thachang Green

Very poor diversification

The 3 months correlation between Eastern and Thachang is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Power Group and Thachang Green Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thachang Green Energy and Eastern Power 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 Eastern Power Group are associated (or correlated) with Thachang Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thachang Green Energy has no effect on the direction of Eastern Power i.e., Eastern Power and Thachang Green go up and down completely randomly.

Pair Corralation between Eastern Power and Thachang Green

Assuming the 90 days horizon Eastern Power Group is expected to generate 0.51 times more return on investment than Thachang Green. However, Eastern Power Group is 1.98 times less risky than Thachang Green. It trades about -0.19 of its potential returns per unit of risk. Thachang Green Energy is currently generating about -0.24 per unit of risk. If you would invest  168.00  in Eastern Power Group on December 30, 2024 and sell it today you would lose (26.00) from holding Eastern Power Group or give up 15.48% of portfolio value over 90 days.

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

Eastern Power Group  vs.  Thachang Green Energy

Eastern Power Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Power Group 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Thachang Green Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thachang Green Energy 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 technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Eastern Power and Thachang Green

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

The idea behind Eastern Power Group and Thachang Green 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.