Correlation Between TF Bank and Investment

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

Diversification Opportunities for TF Bank and Investment

-0.8

Correlation Coefficient

TF Bank  Investment

Pay attention - limited upside

The 3 months correlation between TFBANK and Investment is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding TF Bank AB and Investment AB Latour in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment AB Latour 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment AB Latour has no effect on the direction of TF Bank i.e., TF Bank and Investment go up and down completely randomly.

Pair Corralation between TF Bank and Investment

Assuming the 90 days trading horizon TF Bank AB is expected to generate 1.71 times more return on investment than Investment. However, TF Bank is 1.71 times more volatile than Investment AB Latour. It trades about 0.22 of its potential returns per unit of risk. Investment AB Latour is currently generating about -0.12 per unit of risk. If you would invest  26,000  in TF Bank AB on September 12, 2024 and sell it today you would earn a total of  9,000  from holding TF Bank AB or generate 34.62% return on investment over 90 days.

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

TF Bank AB  vs.  Investment AB Latour

TF Bank AB

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TF Bank AB are ranked lower than 17 (%) 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.

Investment AB Latour

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment AB Latour has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 TF Bank and Investment

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

The idea behind TF Bank AB and Investment AB Latour 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.