Correlation Between DKargo and TNB

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

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

Diversification Opportunities for DKargo and TNB

0.64

Correlation Coefficient

DKargo  TNB

Poor diversification

The 3 months correlation between DKargo and TNB is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding dKargo and TNB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TNB and DKargo 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 dKargo 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 DKargo i.e., DKargo and TNB go up and down completely randomly.

Pair Corralation between DKargo and TNB

Assuming the 90 days trading horizon DKargo is expected to generate 29.31 times less return on investment than TNB. But when comparing it to its historical volatility, dKargo is 7.93 times less risky than TNB. It trades about 0.01 of its potential returns per unit of risk. TNB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.38  in TNB on February 7, 2024 and sell it today you would lose (0.37) from holding TNB or give up 98.45% of portfolio value over 90 days.

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

dKargo  vs.  TNB

dKargo

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in dKargo are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DKargo may actually be approaching a critical reversion point that can send shares even higher in June 2024.

TNB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TNB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, TNB exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DKargo and TNB

The main advantage of trading using opposite DKargo and TNB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DKargo 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 dKargo 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.