Correlation Between GAIA and TNB

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

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

Diversification Opportunities for GAIA and TNB

0.82

Correlation Coefficient

GAIA  TNB

Very poor diversification

The 3 months correlation between GAIA and TNB is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding GAIA and TNB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TNB and GAIA 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 GAIA are associated (or correlated) with TNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TNB has no effect on the direction of GAIA i.e., GAIA and TNB go up and down completely randomly.

Pair Corralation between GAIA and TNB

Assuming the 90 days trading horizon GAIA is expected to under-perform the TNB. In addition to that, GAIA is 3.4 times more volatile than TNB. It trades about -0.04 of its total potential returns per unit of risk. TNB is currently generating about -0.05 per unit of volatility. If you would invest  0.01  in TNB on December 29, 2024 and sell it today you would lose  0.00  from holding TNB or give up 9.52% of portfolio value over 90 days.

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

GAIA  vs.  TNB

GAIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days GAIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for GAIA shareholders.

TNB

Risk-Adjusted Performance

Very Weak

Over the last 90 days TNB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for TNB shareholders.

Pair Trading with GAIA and TNB

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

The idea behind GAIA and TNB 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.