Correlation Between TNB and Klaytn

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

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

Diversification Opportunities for TNB and Klaytn

0.47

Correlation Coefficient

TNB  Klaytn

Very weak diversification

The 3 months correlation between TNB and Klaytn is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding TNB and Klaytn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klaytn and TNB 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 TNB are associated (or correlated) with Klaytn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klaytn has no effect on the direction of TNB i.e., TNB and Klaytn go up and down completely randomly.

Pair Corralation between TNB and Klaytn

Assuming the 90 days trading horizon TNB is expected to generate 0.48 times more return on investment than Klaytn. However, TNB is 2.1 times less risky than Klaytn. It trades about -0.08 of its potential returns per unit of risk. Klaytn is currently generating about -0.17 per unit of risk. If you would invest  0.01  in TNB on February 6, 2024 and sell it today you would lose  0.00  from holding TNB or give up 6.45% of portfolio value over 90 days.

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

TNB  vs.  Klaytn

TNB

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TNB are ranked lower than 13 (%) 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.

Klaytn

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with TNB and Klaytn

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

The idea behind TNB and Klaytn 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.