Correlation Between Regional Container and TPC Power

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

By analyzing existing cross correlation between Regional Container Lines and TPC Power Holding, you can compare the effects of market volatilities on Regional Container and TPC Power 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 Regional Container with a short position of TPC Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Container and TPC Power.

Diversification Opportunities for Regional Container and TPC Power

-0.49

Correlation Coefficient

Regional Container  TPC Power

Very good diversification

The 3 months correlation between Regional and TPC is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines and TPC Power Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPC Power Holding and Regional Container 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 Regional Container Lines are associated (or correlated) with TPC Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPC Power Holding has no effect on the direction of Regional Container i.e., Regional Container and TPC Power go up and down completely randomly.

Pair Corralation between Regional Container and TPC Power

Assuming the 90 days trading horizon Regional Container Lines is expected to generate 33.03 times more return on investment than TPC Power. However, Regional Container is 33.03 times more volatile than TPC Power Holding. It trades about 0.06 of its potential returns per unit of risk. TPC Power Holding is currently generating about -0.02 per unit of risk. If you would invest  3,075  in Regional Container Lines on September 23, 2024 and sell it today you would lose (300.00) from holding Regional Container Lines or give up 9.76% of portfolio value over 90 days.

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

Regional Container Lines  vs.  TPC Power Holding

Regional Container Lines

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Regional Container sustained solid returns over the last few months and may actually be approaching a breakup point.

TPC Power Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPC Power Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Regional Container and TPC Power

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

The idea behind Regional Container Lines and TPC Power Holding 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.