Correlation Between Thermal Energy and BioRem

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

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

Diversification Opportunities for Thermal Energy and BioRem

0.83

Correlation Coefficient

Thermal Energy  BioRem

Very poor diversification

The 3 months correlation between Thermal and BioRem is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Thermal Energy International and BioRem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioRem Inc and Thermal Energy 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 Thermal Energy International are associated (or correlated) with BioRem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioRem Inc has no effect on the direction of Thermal Energy i.e., Thermal Energy and BioRem go up and down completely randomly.

Pair Corralation between Thermal Energy and BioRem

Assuming the 90 days horizon Thermal Energy International is expected to under-perform the BioRem. In addition to that, Thermal Energy is 1.77 times more volatile than BioRem Inc. It trades about -0.07 of its total potential returns per unit of risk. BioRem Inc is currently generating about -0.09 per unit of volatility. If you would invest  295.00  in BioRem Inc on December 29, 2024 and sell it today you would lose (69.00) from holding BioRem Inc or give up 23.39% of portfolio value over 90 days.

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

Thermal Energy International  vs.  BioRem Inc

Thermal Energy Inter

Risk-Adjusted Performance

Very Weak

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

BioRem Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days BioRem Inc 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Thermal Energy and BioRem

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

The idea behind Thermal Energy International and BioRem Inc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.