Correlation Between Eastern Technical and TPI Polene

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

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

Diversification Opportunities for Eastern Technical and TPI Polene

0.47

Correlation Coefficient

Eastern Technical  TPI Polene

Very weak diversification

The 3 months correlation between Eastern and TPI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Technical Engineering 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 Eastern Technical 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 Technical Engineering 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 Eastern Technical i.e., Eastern Technical and TPI Polene go up and down completely randomly.

Pair Corralation between Eastern Technical and TPI Polene

Assuming the 90 days trading horizon Eastern Technical Engineering is expected to generate 155.91 times more return on investment than TPI Polene. However, Eastern Technical is 155.91 times more volatile than TPI Polene Power. It trades about 0.12 of its potential returns per unit of risk. TPI Polene Power is currently generating about 0.06 per unit of risk. If you would invest  0.00  in Eastern Technical Engineering on September 3, 2024 and sell it today you would earn a total of  92.00  from holding Eastern Technical Engineering or generate 9.223372036854776E16% return on investment over 90 days.

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

Eastern Technical Engineering  vs.  TPI Polene Power

Eastern Technical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Technical Engineering are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Eastern Technical disclosed solid returns over the last few months and may actually be approaching a breakup point.

TPI Polene Power

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TPI Polene Power are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, TPI Polene is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastern Technical and TPI Polene

The main advantage of trading using opposite Eastern Technical and TPI Polene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Technical 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 Eastern Technical Engineering 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.