Correlation Between Topaz Energy and Doman Building

Can any of the company-specific risk be diversified away by investing in both Topaz Energy and Doman Building 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 Doman Building 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 Doman Building Materials, you can compare the effects of market volatilities on Topaz Energy and Doman Building 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 Doman Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Topaz Energy and Doman Building.

Diversification Opportunities for Topaz Energy and Doman Building

0.65

Correlation Coefficient

Topaz Energy  Doman Building

Poor diversification

The 3 months correlation between Topaz and Doman is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Topaz Energy Corp and Doman Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doman Building Materials 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 Doman Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doman Building Materials has no effect on the direction of Topaz Energy i.e., Topaz Energy and Doman Building go up and down completely randomly.

Pair Corralation between Topaz Energy and Doman Building

Assuming the 90 days trading horizon Topaz Energy Corp is expected to generate 0.75 times more return on investment than Doman Building. However, Topaz Energy Corp is 1.33 times less risky than Doman Building. It trades about 0.03 of its potential returns per unit of risk. Doman Building Materials is currently generating about 0.0 per unit of risk. If you would invest  2,062  in Topaz Energy Corp on December 5, 2024 and sell it today you would earn a total of  295.00  from holding Topaz Energy Corp or generate 14.31% return on investment over 90 days.

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

Topaz Energy Corp  vs.  Doman Building Materials

Topaz Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Topaz Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Doman Building Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Doman Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Topaz Energy and Doman Building

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

The idea behind Topaz Energy Corp and Doman Building Materials 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..