Correlation Between MicroStrategy Incorporated and TGI Solar

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

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

Diversification Opportunities for MicroStrategy Incorporated and TGI Solar

0.08

Correlation Coefficient

MicroStrategy Incorporated  TGI Solar

Significant diversification

The 3 months correlation between MicroStrategy and TGI is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding MicroStrategy Incorporated and TGI Solar Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGI Solar Power and MicroStrategy Incorporated 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 MicroStrategy Incorporated are associated (or correlated) with TGI Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGI Solar Power has no effect on the direction of MicroStrategy Incorporated i.e., MicroStrategy Incorporated and TGI Solar go up and down completely randomly.

Pair Corralation between MicroStrategy Incorporated and TGI Solar

Given the investment horizon of 90 days MicroStrategy Incorporated is expected to generate 20.44 times less return on investment than TGI Solar. But when comparing it to its historical volatility, MicroStrategy Incorporated is 2.57 times less risky than TGI Solar. It trades about 0.02 of its potential returns per unit of risk. TGI Solar Power is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.06  in TGI Solar Power on December 29, 2024 and sell it today you would earn a total of  0.06  from holding TGI Solar Power or generate 100.0% return on investment over 90 days.

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

MicroStrategy Incorporated  vs.  TGI Solar Power

MicroStrategy Incorporated

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MicroStrategy Incorporated may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TGI Solar Power

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TGI Solar Power are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TGI Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroStrategy Incorporated and TGI Solar

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

The idea behind MicroStrategy Incorporated and TGI Solar 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.