Correlation Between TFS FINANCIAL and TOTAL GABON

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

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

Diversification Opportunities for TFS FINANCIAL and TOTAL GABON

0.03

Correlation Coefficient

TFS FINANCIAL  TOTAL GABON

Significant diversification

The 3 months correlation between TFS and TOTAL is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and TOTAL GABON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL GABON and TFS FINANCIAL 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 TFS FINANCIAL are associated (or correlated) with TOTAL GABON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL GABON has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and TOTAL GABON go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and TOTAL GABON

Assuming the 90 days trading horizon TFS FINANCIAL is expected to under-perform the TOTAL GABON. But the stock apears to be less risky and, when comparing its historical volatility, TFS FINANCIAL is 3.04 times less risky than TOTAL GABON. The stock trades about -0.02 of its potential returns per unit of risk. The TOTAL GABON is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  11,748  in TOTAL GABON on December 28, 2024 and sell it today you would earn a total of  6,652  from holding TOTAL GABON or generate 56.62% return on investment over 90 days.

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

TFS FINANCIAL  vs.  TOTAL GABON

TFS FINANCIAL

Risk-Adjusted Performance

Very Weak

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

TOTAL GABON

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TOTAL GABON are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TOTAL GABON exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TFS FINANCIAL and TOTAL GABON

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

The idea behind TFS FINANCIAL and TOTAL GABON 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.