Correlation Between Tangerine Beach and Nations Trust

Can any of the company-specific risk be diversified away by investing in both Tangerine Beach and Nations Trust 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 Nations Trust 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 Nations Trust Bank, you can compare the effects of market volatilities on Tangerine Beach and Nations Trust 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 Nations Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tangerine Beach and Nations Trust.

Diversification Opportunities for Tangerine Beach and Nations Trust

0.91

Correlation Coefficient

Tangerine Beach  Nations Trust

Almost no diversification

The 3 months correlation between Tangerine and Nations is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Tangerine Beach Hotels and Nations Trust Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nations Trust Bank 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 Nations Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nations Trust Bank has no effect on the direction of Tangerine Beach i.e., Tangerine Beach and Nations Trust go up and down completely randomly.

Pair Corralation between Tangerine Beach and Nations Trust

Assuming the 90 days trading horizon Tangerine Beach is expected to generate 1.65 times less return on investment than Nations Trust. In addition to that, Tangerine Beach is 1.68 times more volatile than Nations Trust Bank. It trades about 0.11 of its total potential returns per unit of risk. Nations Trust Bank is currently generating about 0.29 per unit of volatility. If you would invest  16,050  in Nations Trust Bank on October 10, 2024 and sell it today you would earn a total of  2,025  from holding Nations Trust Bank or generate 12.62% return on investment over 90 days.

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

Tangerine Beach Hotels  vs.  Nations Trust Bank

Tangerine Beach Hotels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tangerine Beach Hotels are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tangerine Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

Nations Trust Bank

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nations Trust Bank are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nations Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tangerine Beach and Nations Trust

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

The idea behind Tangerine Beach Hotels and Nations Trust Bank 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.