Correlation Between Talon Energy and IMedia Brands

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

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

Diversification Opportunities for Talon Energy and IMedia Brands

0.72

Correlation Coefficient

Talon Energy  IMedia Brands

Poor diversification

The 3 months correlation between Talon and IMedia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Talon Energy and IMedia Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMedia Brands and Talon 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 Talon Energy are associated (or correlated) with IMedia Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMedia Brands has no effect on the direction of Talon Energy i.e., Talon Energy and IMedia Brands go up and down completely randomly.

Pair Corralation between Talon Energy and IMedia Brands

If you would invest  2.94  in IMedia Brands on September 28, 2024 and sell it today you would earn a total of  0.00  from holding IMedia Brands or generate 0.0% return on investment over 90 days.

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

Talon Energy  vs.  IMedia Brands

Talon Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Talon Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

IMedia Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IMedia Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, IMedia Brands is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Talon Energy and IMedia Brands

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

The idea behind Talon Energy and IMedia Brands 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.