Correlation Between Tai Tung and TMP Steel
Can any of the company-specific risk be diversified away by investing in both Tai Tung and TMP 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 Tai Tung and TMP Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tai Tung Communication and TMP Steel, you can compare the effects of market volatilities on Tai Tung and TMP 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 Tai Tung with a short position of TMP Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tai Tung and TMP Steel.
Diversification Opportunities for Tai Tung and TMP Steel
Almost no diversification
The 3 months correlation between Tai and TMP is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and TMP Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMP Steel and Tai Tung 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 Tai Tung Communication are associated (or correlated) with TMP Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMP Steel has no effect on the direction of Tai Tung i.e., Tai Tung and TMP Steel go up and down completely randomly.
Pair Corralation between Tai Tung and TMP Steel
Assuming the 90 days trading horizon Tai Tung Communication is expected to generate 2.02 times more return on investment than TMP Steel. However, Tai Tung is 2.02 times more volatile than TMP Steel. It trades about 0.01 of its potential returns per unit of risk. TMP Steel is currently generating about 0.0 per unit of risk. If you would invest 2,380 in Tai Tung Communication on November 3, 2024 and sell it today you would lose (125.00) from holding Tai Tung Communication or give up 5.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tai Tung Communication vs. TMP Steel
Performance |
| Timeline |
| Tai Tung Communication |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| TMP Steel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Tai Tung and TMP Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tai Tung and TMP Steel
The main advantage of trading using opposite Tai Tung and TMP Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tai Tung position performs unexpectedly, TMP 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 TMP Steel will offset losses from the drop in TMP Steel's long position.The idea behind Tai Tung Communication and TMP Steel 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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