Correlation Between PAY and TNB
Can any of the company-specific risk be diversified away by investing in both PAY 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 PAY and TNB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PAY and TNB, you can compare the effects of market volatilities on PAY 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 PAY with a short position of TNB. Check out your portfolio center. Please also check ongoing floating volatility patterns of PAY and TNB.
Diversification Opportunities for PAY and TNB
Good diversification
The 3 months correlation between PAY and TNB is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding PAY and TNB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TNB and PAY 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 PAY 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 PAY i.e., PAY and TNB go up and down completely randomly.
Pair Corralation between PAY and TNB
Assuming the 90 days trading horizon PAY is expected to under-perform the TNB. In addition to that, PAY is 1.88 times more volatile than TNB. It trades about -0.07 of its total potential returns per unit of risk. TNB is currently generating about 0.38 per unit of volatility. If you would invest 0.01 in TNB on September 4, 2024 and sell it today you would earn a total of 0.00 from holding TNB or generate 38.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PAY vs. TNB
Performance |
| Timeline |
| PAY |
| TNB |
PAY and TNB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PAY and TNB
The main advantage of trading using opposite PAY and TNB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PAY 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 PAY 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.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Stocks Directory Find actively traded stocks across global markets |