Correlation Between TPI Polene and Absolute Clean

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

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

Diversification Opportunities for TPI Polene and Absolute Clean

0.08

Correlation Coefficient

TPI Polene  Absolute Clean

Significant diversification

The 3 months correlation between TPI and Absolute is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding TPI Polene Power and Absolute Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Clean Energy and TPI Polene 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 TPI Polene Power are associated (or correlated) with Absolute Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Clean Energy has no effect on the direction of TPI Polene i.e., TPI Polene and Absolute Clean go up and down completely randomly.

Pair Corralation between TPI Polene and Absolute Clean

Assuming the 90 days trading horizon TPI Polene Power is expected to under-perform the Absolute Clean. In addition to that, TPI Polene is 1.18 times more volatile than Absolute Clean Energy. It trades about -0.22 of its total potential returns per unit of risk. Absolute Clean Energy is currently generating about -0.06 per unit of volatility. If you would invest  136.00  in Absolute Clean Energy on December 30, 2024 and sell it today you would lose (8.00) from holding Absolute Clean Energy or give up 5.88% of portfolio value over 90 days.

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

TPI Polene Power  vs.  Absolute Clean Energy

TPI Polene Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days TPI Polene Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Absolute Clean Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Absolute Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Absolute Clean is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with TPI Polene and Absolute Clean

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

The idea behind TPI Polene Power and Absolute Clean 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.