Correlation Between Eureka Design and TV Thunder

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

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

Diversification Opportunities for Eureka Design and TV Thunder

0.15

Correlation Coefficient

Eureka Design  TV Thunder

Average diversification

The 3 months correlation between Eureka and TVT is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Eureka Design Public and TV Thunder Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TV Thunder Public and Eureka Design 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 Eureka Design Public are associated (or correlated) with TV Thunder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TV Thunder Public has no effect on the direction of Eureka Design i.e., Eureka Design and TV Thunder go up and down completely randomly.

Pair Corralation between Eureka Design and TV Thunder

Assuming the 90 days trading horizon Eureka Design Public is expected to under-perform the TV Thunder. But the stock apears to be less risky and, when comparing its historical volatility, Eureka Design Public is 1.77 times less risky than TV Thunder. The stock trades about -0.06 of its potential returns per unit of risk. The TV Thunder Public is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  32.00  in TV Thunder Public on December 29, 2024 and sell it today you would lose (3.00) from holding TV Thunder Public or give up 9.38% of portfolio value over 90 days.

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

Eureka Design Public  vs.  TV Thunder Public

Eureka Design Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eureka Design Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

TV Thunder Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days TV Thunder Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, TV Thunder 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 Eureka Design and TV Thunder

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

The idea behind Eureka Design Public and TV Thunder Public 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.