Correlation Between Therma Bright and Vicinity

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Can any of the company-specific risk be diversified away by investing in both Therma Bright and Vicinity 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 Vicinity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Therma Bright and Vicinity Motor Corp, you can compare the effects of market volatilities on Therma Bright and Vicinity 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 Vicinity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Therma Bright and Vicinity.

Diversification Opportunities for Therma Bright and Vicinity

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Therma and Vicinity is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Therma Bright and Vicinity Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicinity Motor Corp 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 Vicinity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicinity Motor Corp has no effect on the direction of Therma Bright i.e., Therma Bright and Vicinity go up and down completely randomly.

Pair Corralation between Therma Bright and Vicinity

Assuming the 90 days trading horizon Therma Bright is expected to under-perform the Vicinity. In addition to that, Therma Bright is 1.21 times more volatile than Vicinity Motor Corp. It trades about -0.16 of its total potential returns per unit of risk. Vicinity Motor Corp is currently generating about -0.13 per unit of volatility. If you would invest  16.00  in Vicinity Motor Corp on September 6, 2024 and sell it today you would lose (9.00) from holding Vicinity Motor Corp or give up 56.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy98.44%
ValuesDaily Returns

Therma Bright  vs.  Vicinity Motor Corp

 Performance 
       Timeline  
Therma Bright 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
Vicinity Motor Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vicinity Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Therma Bright and Vicinity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Therma Bright and Vicinity

The main advantage of trading using opposite Therma Bright and Vicinity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Therma Bright position performs unexpectedly, Vicinity 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 Vicinity will offset losses from the drop in Vicinity's long position.
The idea behind Therma Bright and Vicinity Motor Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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