Correlation Between VINCI and TNB

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

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

Diversification Opportunities for VINCI and TNB

0.99

Correlation Coefficient

VINCI  TNB

No risk reduction

The 3 months correlation between VINCI and TNB is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding VINCI and TNB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TNB and VINCI 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 VINCI are associated (or correlated) with TNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TNB has no effect on the direction of VINCI i.e., VINCI and TNB go up and down completely randomly.

Pair Corralation between VINCI and TNB

Assuming the 90 days trading horizon VINCI is expected to under-perform the TNB. In addition to that, VINCI is 1.04 times more volatile than TNB. It trades about -0.03 of its total potential returns per unit of risk. TNB is currently generating about -0.01 per unit of volatility. If you would invest  0.01  in TNB on November 27, 2024 and sell it today you would lose  0.00  from holding TNB or give up 3.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

VINCI  vs.  TNB

VINCI

Risk-Adjusted Performance

Very Weak

Over the last 90 days VINCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, VINCI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

TNB

Risk-Adjusted Performance

Very Weak

Over the last 90 days TNB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, TNB is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VINCI and TNB

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

The idea behind VINCI and TNB 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.