Correlation Between Therma Bright and Valeura Energy

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

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

Diversification Opportunities for Therma Bright and Valeura Energy

-0.76

Correlation Coefficient

Therma Bright  Valeura Energy

Pay attention - limited upside

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

Pair Corralation between Therma Bright and Valeura Energy

Assuming the 90 days trading horizon Therma Bright is expected to generate 3.66 times more return on investment than Valeura Energy. However, Therma Bright is 3.66 times more volatile than Valeura Energy. It trades about 0.05 of its potential returns per unit of risk. Valeura Energy is currently generating about 0.07 per unit of risk. If you would invest  7.50  in Therma Bright on October 4, 2024 and sell it today you would lose (4.00) from holding Therma Bright or give up 53.33% of portfolio value over 90 days.

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

Therma Bright  vs.  Valeura Energy

Therma Bright

Risk-Adjusted Performance

0 of 100

Very Weak

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

Valeura Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Valeura Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Therma Bright and Valeura Energy

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

The idea behind Therma Bright and Valeura Energy 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.