Correlation Between Power Finance and Thomas Scott

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

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

Diversification Opportunities for Power Finance and Thomas Scott

-0.42

Correlation Coefficient

Power Finance  Thomas Scott

Very good diversification

The 3 months correlation between Power and Thomas is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and Thomas Scott Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomas Scott Limited and Power Finance 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 Power Finance are associated (or correlated) with Thomas Scott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomas Scott Limited has no effect on the direction of Power Finance i.e., Power Finance and Thomas Scott go up and down completely randomly.

Pair Corralation between Power Finance and Thomas Scott

Assuming the 90 days trading horizon Power Finance is expected to generate 1.52 times more return on investment than Thomas Scott. However, Power Finance is 1.52 times more volatile than Thomas Scott Limited. It trades about -0.1 of its potential returns per unit of risk. Thomas Scott Limited is currently generating about -0.47 per unit of risk. If you would invest  45,120  in Power Finance on October 25, 2024 and sell it today you would lose (3,060) from holding Power Finance or give up 6.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Power Finance  vs.  Thomas Scott Limited

Power Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Power Finance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Thomas Scott Limited

Risk-Adjusted Performance

28 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thomas Scott Limited are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Thomas Scott exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Finance and Thomas Scott

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

The idea behind Power Finance and Thomas Scott Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.