Correlation Between Tangerine Beach and Chemanex PLC

Can any of the company-specific risk be diversified away by investing in both Tangerine Beach and Chemanex PLC 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 Tangerine Beach and Chemanex PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tangerine Beach Hotels and Chemanex PLC, you can compare the effects of market volatilities on Tangerine Beach and Chemanex PLC 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 Tangerine Beach with a short position of Chemanex PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tangerine Beach and Chemanex PLC.

Diversification Opportunities for Tangerine Beach and Chemanex PLC

0.31

Correlation Coefficient

Tangerine Beach  Chemanex PLC

Weak diversification

The 3 months correlation between Tangerine and Chemanex is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tangerine Beach Hotels and Chemanex PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemanex PLC and Tangerine Beach 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 Tangerine Beach Hotels are associated (or correlated) with Chemanex PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemanex PLC has no effect on the direction of Tangerine Beach i.e., Tangerine Beach and Chemanex PLC go up and down completely randomly.

Pair Corralation between Tangerine Beach and Chemanex PLC

Assuming the 90 days trading horizon Tangerine Beach Hotels is expected to under-perform the Chemanex PLC. But the stock apears to be less risky and, when comparing its historical volatility, Tangerine Beach Hotels is 1.04 times less risky than Chemanex PLC. The stock trades about -0.09 of its potential returns per unit of risk. The Chemanex PLC is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  16,975  in Chemanex PLC on December 28, 2024 and sell it today you would lose (1,725) from holding Chemanex PLC or give up 10.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.43%
Values	Daily Returns

Tangerine Beach Hotels  vs.  Chemanex PLC

Tangerine Beach Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tangerine Beach Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chemanex PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chemanex PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tangerine Beach and Chemanex PLC

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

The idea behind Tangerine Beach Hotels and Chemanex PLC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.