Correlation Between TECO Electric and Sampo Corp
Can any of the company-specific risk be diversified away by investing in both TECO Electric and Sampo Corp 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 TECO Electric and Sampo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TECO Electric Machinery and Sampo Corp, you can compare the effects of market volatilities on TECO Electric and Sampo Corp 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 TECO Electric with a short position of Sampo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of TECO Electric and Sampo Corp.
Diversification Opportunities for TECO Electric and Sampo Corp
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between TECO and Sampo is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding TECO Electric Machinery and Sampo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sampo Corp and TECO Electric 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 TECO Electric Machinery are associated (or correlated) with Sampo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sampo Corp has no effect on the direction of TECO Electric i.e., TECO Electric and Sampo Corp go up and down completely randomly.
Pair Corralation between TECO Electric and Sampo Corp
Assuming the 90 days trading horizon TECO Electric Machinery is expected to generate 3.3 times more return on investment than Sampo Corp. However, TECO Electric is 3.3 times more volatile than Sampo Corp. It trades about 0.07 of its potential returns per unit of risk. Sampo Corp is currently generating about 0.09 per unit of risk. If you would invest 5,310 in TECO Electric Machinery on November 4, 2024 and sell it today you would earn a total of 50.00 from holding TECO Electric Machinery or generate 0.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TECO Electric Machinery vs. Sampo Corp
Performance |
| Timeline |
| TECO Electric Machinery |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Sampo Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
TECO Electric and Sampo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TECO Electric and Sampo Corp
The main advantage of trading using opposite TECO Electric and Sampo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TECO Electric position performs unexpectedly, Sampo Corp 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 Sampo Corp will offset losses from the drop in Sampo Corp's long position.The idea behind TECO Electric Machinery and Sampo Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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