Correlation Between Neoen SA and TOHOKU EL

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

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

Diversification Opportunities for Neoen SA and TOHOKU EL

-0.16

Correlation Coefficient

Neoen SA  TOHOKU EL

Good diversification

The 3 months correlation between Neoen and TOHOKU is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Neoen SA and TOHOKU EL PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOHOKU EL PWR and Neoen SA 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 Neoen SA are associated (or correlated) with TOHOKU EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOHOKU EL PWR has no effect on the direction of Neoen SA i.e., Neoen SA and TOHOKU EL go up and down completely randomly.

Pair Corralation between Neoen SA and TOHOKU EL

Assuming the 90 days horizon Neoen SA is expected to generate 0.49 times more return on investment than TOHOKU EL. However, Neoen SA is 2.04 times less risky than TOHOKU EL. It trades about -0.06 of its potential returns per unit of risk. TOHOKU EL PWR is currently generating about -0.11 per unit of risk. If you would invest  3,976  in Neoen SA on December 28, 2024 and sell it today you would lose (106.00) from holding Neoen SA or give up 2.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Neoen SA  vs.  TOHOKU EL PWR

Neoen SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neoen SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Neoen SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TOHOKU EL PWR

Risk-Adjusted Performance

Very Weak

Over the last 90 days TOHOKU EL PWR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Neoen SA and TOHOKU EL

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

The idea behind Neoen SA and TOHOKU EL PWR 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.