Correlation Between THC and IOC

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

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

Diversification Opportunities for THC and IOC

0.0

Correlation Coefficient

THC  IOC

Pay attention - limited upside

The 3 months correlation between THC and IOC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding THC and IOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IOC and THC 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 THC are associated (or correlated) with IOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IOC has no effect on the direction of THC i.e., THC and IOC go up and down completely randomly.

Pair Corralation between THC and IOC

If you would invest  0.09  in THC on April 22, 2025 and sell it today you would earn a total of  0.02  from holding THC or generate 25.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

THC  vs.  IOC

THC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in THC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, THC exhibited solid returns over the last few months and may actually be approaching a breakup point.

IOC

Risk-Adjusted Performance

Good

Over the last 90 days IOC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, IOC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with THC and IOC

The main advantage of trading using opposite THC and IOC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THC position performs unexpectedly, IOC 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 IOC will offset losses from the drop in IOC's long position.

The idea behind THC and IOC 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.