Correlation Between PT Steel and DAIDO METAL

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Can any of the company-specific risk be diversified away by investing in both PT Steel and DAIDO METAL 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 PT Steel and DAIDO METAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Steel Pipe and DAIDO METAL TD, you can compare the effects of market volatilities on PT Steel and DAIDO METAL 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 PT Steel with a short position of DAIDO METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Steel and DAIDO METAL.

Diversification Opportunities for PT Steel and DAIDO METAL

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between S08 and DAIDO is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe and DAIDO METAL TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIDO METAL TD and PT 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 PT Steel Pipe are associated (or correlated) with DAIDO METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIDO METAL TD has no effect on the direction of PT Steel i.e., PT Steel and DAIDO METAL go up and down completely randomly.

Pair Corralation between PT Steel and DAIDO METAL

Assuming the 90 days horizon PT Steel Pipe is expected to generate 1.75 times more return on investment than DAIDO METAL. However, PT Steel is 1.75 times more volatile than DAIDO METAL TD. It trades about 0.01 of its potential returns per unit of risk. DAIDO METAL TD is currently generating about -0.07 per unit of risk. If you would invest  1.20  in PT Steel Pipe on October 25, 2024 and sell it today you would lose (0.05) from holding PT Steel Pipe or give up 4.17% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

PT Steel Pipe  vs.  DAIDO METAL TD

 Performance 
       Timeline  
PT Steel Pipe 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PT Steel Pipe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
DAIDO METAL TD 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in DAIDO METAL TD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DAIDO METAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Steel and DAIDO METAL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PT Steel and DAIDO METAL

The main advantage of trading using opposite PT Steel and DAIDO METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Steel position performs unexpectedly, DAIDO METAL 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 DAIDO METAL will offset losses from the drop in DAIDO METAL's long position.
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The idea behind PT Steel Pipe and DAIDO METAL TD 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.
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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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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