Correlation Between Tennant and NET Power
Can any of the company-specific risk be diversified away by investing in both Tennant and NET Power 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 Tennant and NET Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tennant Company and NET Power, you can compare the effects of market volatilities on Tennant and NET Power 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 Tennant with a short position of NET Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tennant and NET Power.
Diversification Opportunities for Tennant and NET Power
Excellent diversification
The 3 months correlation between Tennant and NET is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Tennant Company and NET Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NET Power and Tennant 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 Tennant Company are associated (or correlated) with NET Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NET Power has no effect on the direction of Tennant i.e., Tennant and NET Power go up and down completely randomly.
Pair Corralation between Tennant and NET Power
Considering the 90-day investment horizon Tennant Company is expected to under-perform the NET Power. But the stock apears to be less risky and, when comparing its historical volatility, Tennant Company is 2.4 times less risky than NET Power. The stock trades about -0.08 of its potential returns per unit of risk. The NET Power is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 983.00 in NET Power on September 26, 2024 and sell it today you would earn a total of 16.00 from holding NET Power or generate 1.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Tennant Company vs. NET Power
Performance |
Timeline |
Tennant Company |
NET Power |
Tennant and NET Power Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tennant and NET Power
The main advantage of trading using opposite Tennant and NET Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tennant position performs unexpectedly, NET Power 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 NET Power will offset losses from the drop in NET Power's long position.Tennant vs. Franklin Electric Co | Tennant vs. Omega Flex | Tennant vs. Luxfer Holdings PLC | Tennant vs. Kadant Inc |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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