Correlation Between Leons Furniture and TC Energy

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

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

Diversification Opportunities for Leons Furniture and TC Energy

-0.81

Correlation Coefficient

Leons Furniture  TC Energy

Pay attention - limited upside

The 3 months correlation between Leons and TRP-PA is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Leons Furniture i.e., Leons Furniture and TC Energy go up and down completely randomly.

Pair Corralation between Leons Furniture and TC Energy

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the TC Energy. In addition to that, Leons Furniture is 1.45 times more volatile than TC Energy Corp. It trades about -0.13 of its total potential returns per unit of risk. TC Energy Corp is currently generating about 0.24 per unit of volatility. If you would invest  1,660  in TC Energy Corp on October 25, 2024 and sell it today you would earn a total of  217.00  from holding TC Energy Corp or generate 13.07% return on investment over 90 days.

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

Leons Furniture Limited  vs.  TC Energy Corp

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

TC Energy Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, TC Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leons Furniture and TC Energy

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

The idea behind Leons Furniture Limited and TC Energy Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.