Correlation Between METISA Metalrgica and TAL Education
Can any of the company-specific risk be diversified away by investing in both METISA Metalrgica and TAL Education 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 METISA Metalrgica and TAL Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METISA Metalrgica Timboense and TAL Education Group, you can compare the effects of market volatilities on METISA Metalrgica and TAL Education 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 METISA Metalrgica with a short position of TAL Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of METISA Metalrgica and TAL Education.
Diversification Opportunities for METISA Metalrgica and TAL Education
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between METISA and TAL is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding METISA Metalrgica Timboense and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group and METISA Metalrgica 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 METISA Metalrgica Timboense are associated (or correlated) with TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of METISA Metalrgica i.e., METISA Metalrgica and TAL Education go up and down completely randomly.
Pair Corralation between METISA Metalrgica and TAL Education
Assuming the 90 days trading horizon METISA Metalrgica is expected to generate 5.7 times less return on investment than TAL Education. But when comparing it to its historical volatility, METISA Metalrgica Timboense is 2.37 times less risky than TAL Education. It trades about 0.03 of its potential returns per unit of risk. TAL Education Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 310.00 in TAL Education Group on December 12, 2024 and sell it today you would earn a total of 445.00 from holding TAL Education Group or generate 143.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.98% |
| Values | Daily Returns |
METISA Metalrgica Timboense vs. TAL Education Group
Performance |
| Timeline |
| METISA Metalrgica |
| TAL Education Group |
METISA Metalrgica and TAL Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METISA Metalrgica and TAL Education
The main advantage of trading using opposite METISA Metalrgica and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METISA Metalrgica position performs unexpectedly, TAL Education 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 TAL Education will offset losses from the drop in TAL Education's long position.| METISA Metalrgica vs. Schulz SA | ||
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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