Correlation Between TNB and Ontology

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

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

Diversification Opportunities for TNB and Ontology

0.06

Correlation Coefficient

TNB  Ontology

Significant diversification

The 3 months correlation between TNB and Ontology is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding TNB and Ontology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ontology and TNB 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 TNB are associated (or correlated) with Ontology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ontology has no effect on the direction of TNB i.e., TNB and Ontology go up and down completely randomly.

Pair Corralation between TNB and Ontology

Assuming the 90 days trading horizon TNB is expected to generate 0.3 times more return on investment than Ontology. However, TNB is 3.35 times less risky than Ontology. It trades about -0.01 of its potential returns per unit of risk. Ontology is currently generating about -0.05 per unit of risk. If you would invest  0.01  in TNB on November 27, 2024 and sell it today you would lose  0.00  from holding TNB or give up 3.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

TNB  vs.  Ontology

TNB

Risk-Adjusted Performance

Very Weak

Over the last 90 days TNB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, TNB is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ontology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ontology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for Ontology shareholders.

Pair Trading with TNB and Ontology

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

The idea behind TNB and Ontology 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.