Correlation Between Topaz Energy and Bird Construction

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

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

Diversification Opportunities for Topaz Energy and Bird Construction

0.77

Correlation Coefficient

Topaz Energy  Bird Construction

Poor diversification

The 3 months correlation between Topaz and Bird is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Topaz Energy Corp and Bird Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bird Construction and Topaz 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 Topaz Energy Corp are associated (or correlated) with Bird Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bird Construction has no effect on the direction of Topaz Energy i.e., Topaz Energy and Bird Construction go up and down completely randomly.

Pair Corralation between Topaz Energy and Bird Construction

Assuming the 90 days trading horizon Topaz Energy Corp is expected to generate 0.68 times more return on investment than Bird Construction. However, Topaz Energy Corp is 1.47 times less risky than Bird Construction. It trades about -0.18 of its potential returns per unit of risk. Bird Construction is currently generating about -0.14 per unit of risk. If you would invest  2,845  in Topaz Energy Corp on September 17, 2024 and sell it today you would lose (143.00) from holding Topaz Energy Corp or give up 5.03% of portfolio value over 90 days.

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

Topaz Energy Corp  vs.  Bird Construction

Topaz Energy Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Topaz Energy Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Topaz Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Bird Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bird Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bird Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Topaz Energy and Bird Construction

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

The idea behind Topaz Energy Corp and Bird Construction 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 Transaction History module to view history of all your transactions and understand their impact on performance.