Correlation Between TMP Steel and Mayer Steel
Can any of the company-specific risk be diversified away by investing in both TMP Steel and Mayer 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 Mayer 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 Mayer Steel Pipe, you can compare the effects of market volatilities on TMP Steel and Mayer 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 Mayer Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMP Steel and Mayer Steel.
Diversification Opportunities for TMP Steel and Mayer Steel
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between TMP and Mayer is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding TMP Steel and Mayer Steel Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayer Steel Pipe 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 Mayer Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayer Steel Pipe has no effect on the direction of TMP Steel i.e., TMP Steel and Mayer Steel go up and down completely randomly.
Pair Corralation between TMP Steel and Mayer Steel
Assuming the 90 days trading horizon TMP Steel is expected to generate 1.34 times less return on investment than Mayer Steel. But when comparing it to its historical volatility, TMP Steel is 1.05 times less risky than Mayer Steel. It trades about 0.03 of its potential returns per unit of risk. Mayer Steel Pipe is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,400 in Mayer Steel Pipe on December 1, 2024 and sell it today you would earn a total of 700.00 from holding Mayer Steel Pipe or generate 29.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TMP Steel vs. Mayer Steel Pipe
Performance |
| Timeline |
| TMP Steel |
| Mayer Steel Pipe |
TMP Steel and Mayer Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TMP Steel and Mayer Steel
The main advantage of trading using opposite TMP Steel and Mayer Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMP Steel position performs unexpectedly, Mayer 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 Mayer Steel will offset losses from the drop in Mayer Steel's long position.| TMP Steel vs. An Shin Food Services | TMP Steel vs. Formosa International Hotels | TMP Steel vs. Tehmag Foods | TMP Steel vs. China Metal Products |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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