Correlation Between TMP Steel and China Steel
Can any of the company-specific risk be diversified away by investing in both TMP Steel and China Steel 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 TMP Steel and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TMP Steel and China Steel Corp, you can compare the effects of market volatilities on TMP Steel and China Steel 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 TMP Steel with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMP Steel and China Steel.
Diversification Opportunities for TMP Steel and China Steel
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TMP and China is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding TMP Steel and China Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Corp and TMP Steel 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 TMP Steel are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Corp has no effect on the direction of TMP Steel i.e., TMP Steel and China Steel go up and down completely randomly.
Pair Corralation between TMP Steel and China Steel
Assuming the 90 days trading horizon TMP Steel is expected to generate 1.45 times more return on investment than China Steel. However, TMP Steel is 1.45 times more volatile than China Steel Corp. It trades about -0.01 of its potential returns per unit of risk. China Steel Corp is currently generating about -0.05 per unit of risk. If you would invest 3,124 in TMP Steel on August 26, 2024 and sell it today you would lose (279.00) from holding TMP Steel or give up 8.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
TMP Steel vs. China Steel Corp
Performance |
| Timeline |
| TMP Steel |
| China Steel Corp |
TMP Steel and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TMP Steel and China Steel
The main advantage of trading using opposite TMP Steel and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMP Steel position performs unexpectedly, China Steel 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 China Steel will offset losses from the drop in China Steel's long position.| TMP Steel vs. China Steel Corp | TMP Steel vs. Chung Hung Steel | TMP Steel vs. Tung Ho Steel | TMP Steel vs. Feng Hsin Steel |
| China Steel vs. Cheng Shin Rubber | China Steel vs. Taiwan Cement Corp | China Steel vs. China Steel Chemical | China Steel vs. Yulon Motor Co |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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