Correlation Between TF Bank and High Coast

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

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

Diversification Opportunities for TF Bank and High Coast

0.76

Correlation Coefficient

TF Bank  High Coast

Poor diversification

The 3 months correlation between TFBANK and High is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding TF Bank AB and High Coast Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Coast Distillery and TF Bank 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 TF Bank AB are associated (or correlated) with High Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Coast Distillery has no effect on the direction of TF Bank i.e., TF Bank and High Coast go up and down completely randomly.

Pair Corralation between TF Bank and High Coast

Assuming the 90 days trading horizon TF Bank AB is expected to generate 0.75 times more return on investment than High Coast. However, TF Bank AB is 1.33 times less risky than High Coast. It trades about 0.11 of its potential returns per unit of risk. High Coast Distillery is currently generating about 0.0 per unit of risk. If you would invest  16,120  in TF Bank AB on September 30, 2024 and sell it today you would earn a total of  21,380  from holding TF Bank AB or generate 132.63% return on investment over 90 days.

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

TF Bank AB  vs.  High Coast Distillery

TF Bank AB

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TF Bank AB are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, TF Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

High Coast Distillery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in High Coast Distillery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, High Coast sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TF Bank and High Coast

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

The idea behind TF Bank AB and High Coast Distillery 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.