Correlation Between Sunny Friend and TMP Steel
Can any of the company-specific risk be diversified away by investing in both Sunny Friend 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 Sunny Friend and TMP Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunny Friend Environmental and TMP Steel, you can compare the effects of market volatilities on Sunny Friend 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 Sunny Friend with a short position of TMP Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Friend and TMP Steel.
Diversification Opportunities for Sunny Friend and TMP Steel
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sunny and TMP is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and TMP Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMP Steel and Sunny Friend 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 Sunny Friend Environmental 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 Sunny Friend i.e., Sunny Friend and TMP Steel go up and down completely randomly.
Pair Corralation between Sunny Friend and TMP Steel
Assuming the 90 days trading horizon Sunny Friend Environmental is expected to under-perform the TMP Steel. But the stock apears to be less risky and, when comparing its historical volatility, Sunny Friend Environmental is 1.1 times less risky than TMP Steel. The stock trades about -0.06 of its potential returns per unit of risk. The TMP Steel is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,805 in TMP Steel on November 3, 2024 and sell it today you would lose (55.00) from holding TMP Steel or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunny Friend Environmental vs. TMP Steel
Performance |
| Timeline |
| Sunny Friend Environ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| TMP Steel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Sunny Friend and TMP Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunny Friend and TMP Steel
The main advantage of trading using opposite Sunny Friend and TMP Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunny Friend 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 Sunny Friend Environmental 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |