Correlation Between Tethys Oil and Indutrade

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

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

Diversification Opportunities for Tethys Oil and Indutrade

-0.41

Correlation Coefficient

Tethys Oil  Indutrade

Very good diversification

The 3 months correlation between Tethys and Indutrade is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tethys Oil AB and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Tethys Oil 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 Tethys Oil AB are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Tethys Oil i.e., Tethys Oil and Indutrade go up and down completely randomly.

Pair Corralation between Tethys Oil and Indutrade

Assuming the 90 days trading horizon Tethys Oil AB is expected to generate 0.56 times more return on investment than Indutrade. However, Tethys Oil AB is 1.78 times less risky than Indutrade. It trades about 0.12 of its potential returns per unit of risk. Indutrade AB is currently generating about -0.13 per unit of risk. If you would invest  5,630  in Tethys Oil AB on August 31, 2024 and sell it today you would earn a total of  110.00  from holding Tethys Oil AB or generate 1.95% return on investment over 90 days.

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

Tethys Oil AB  vs.  Indutrade AB

Tethys Oil AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tethys Oil AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Tethys Oil unveiled solid returns over the last few months and may actually be approaching a breakup point.

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Tethys Oil and Indutrade

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

The idea behind Tethys Oil AB and Indutrade AB 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.