Correlation Between Bestec Power and TECO Electric

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

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

Diversification Opportunities for Bestec Power and TECO Electric

-0.69

Correlation Coefficient

Bestec Power  TECO Electric

Excellent diversification

The 3 months correlation between Bestec and TECO is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bestec Power Electronics 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 Bestec Power 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 Bestec Power Electronics 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 Bestec Power i.e., Bestec Power and TECO Electric go up and down completely randomly.

Pair Corralation between Bestec Power and TECO Electric

Assuming the 90 days trading horizon Bestec Power Electronics is expected to under-perform the TECO Electric. But the stock apears to be less risky and, when comparing its historical volatility, Bestec Power Electronics is 1.24 times less risky than TECO Electric. The stock trades about -0.31 of its potential returns per unit of risk. The TECO Electric Machinery is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,620  in TECO Electric Machinery on February 1, 2024 and sell it today you would lose (60.00) from holding TECO Electric Machinery or give up 1.07% of portfolio value over 90 days.

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

Bestec Power Electronics  vs.  TECO Electric Machinery

Bestec Power Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bestec Power Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

TECO Electric Machinery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TECO Electric Machinery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TECO Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bestec Power and TECO Electric

The main advantage of trading using opposite Bestec Power and TECO Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bestec Power 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 Bestec Power Electronics 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.