Correlation Between Therma Bright and Newtopia

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

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

Diversification Opportunities for Therma Bright and Newtopia

0.0

Correlation Coefficient

Therma Bright  Newtopia

Pay attention - limited upside

The 3 months correlation between Therma and Newtopia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Therma Bright and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia and Therma Bright 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 Therma Bright are associated (or correlated) with Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of Therma Bright i.e., Therma Bright and Newtopia go up and down completely randomly.

Pair Corralation between Therma Bright and Newtopia

If you would invest  4.00  in Therma Bright on October 25, 2024 and sell it today you would earn a total of  0.50  from holding Therma Bright or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Therma Bright  vs.  Newtopia

Therma Bright

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Therma Bright are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Therma Bright showed solid returns over the last few months and may actually be approaching a breakup point.

Newtopia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtopia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Newtopia is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Therma Bright and Newtopia

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

The idea behind Therma Bright and Newtopia 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.