Correlation Between Hota Industrial and TECO Electric
Can any of the company-specific risk be diversified away by investing in both Hota Industrial and TECO Electric 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 Hota Industrial and TECO Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hota Industrial Mfg and TECO Electric Machinery, you can compare the effects of market volatilities on Hota Industrial and TECO Electric 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 Hota Industrial with a short position of TECO Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hota Industrial and TECO Electric.
Diversification Opportunities for Hota Industrial and TECO Electric
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hota and TECO is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hota Industrial Mfg and TECO Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TECO Electric Machinery and Hota Industrial 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 Hota Industrial Mfg are associated (or correlated) with TECO Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TECO Electric Machinery has no effect on the direction of Hota Industrial i.e., Hota Industrial and TECO Electric go up and down completely randomly.
Pair Corralation between Hota Industrial and TECO Electric
Assuming the 90 days trading horizon Hota Industrial Mfg is expected to under-perform the TECO Electric. In addition to that, Hota Industrial is 3.0 times more volatile than TECO Electric Machinery. It trades about -0.31 of its total potential returns per unit of risk. TECO Electric Machinery is currently generating about 0.03 per unit of volatility. If you would invest 5,340 in TECO Electric Machinery on November 5, 2024 and sell it today you would earn a total of 20.00 from holding TECO Electric Machinery or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hota Industrial Mfg vs. TECO Electric Machinery
Performance |
| Timeline |
| Hota Industrial Mfg |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| TECO Electric Machinery |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Hota Industrial and TECO Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hota Industrial and TECO Electric
The main advantage of trading using opposite Hota Industrial and TECO Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hota Industrial position performs unexpectedly, TECO Electric 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 TECO Electric will offset losses from the drop in TECO Electric's long position.The idea behind Hota Industrial Mfg and TECO Electric Machinery 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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