Correlation Between Tienlen Steel and Sao Ta

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

Diversification Opportunities for Tienlen Steel and Sao Ta

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Tienlen and Sao is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tienlen Steel Corp and Sao Ta Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sao Ta Foods and Tienlen 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 Tienlen Steel Corp are associated (or correlated) with Sao Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sao Ta Foods has no effect on the direction of Tienlen Steel i.e., Tienlen Steel and Sao Ta go up and down completely randomly.

Pair Corralation between Tienlen Steel and Sao Ta

Assuming the 90 days trading horizon Tienlen Steel Corp is expected to under-perform the Sao Ta. In addition to that, Tienlen Steel is 1.62 times more volatile than Sao Ta Foods. It trades about -0.59 of its total potential returns per unit of risk. Sao Ta Foods is currently generating about 0.13 per unit of volatility. If you would invest  4,570,000  in Sao Ta Foods on August 29, 2024 and sell it today you would earn a total of  105,000  from holding Sao Ta Foods or generate 2.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Tienlen Steel Corp  vs.  Sao Ta Foods

 Performance 
       Timeline  
Tienlen Steel Corp 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Tienlen Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Sao Ta Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sao Ta Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Tienlen Steel and Sao Ta Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tienlen Steel and Sao Ta

The main advantage of trading using opposite Tienlen Steel and Sao Ta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tienlen Steel position performs unexpectedly, Sao Ta 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 Sao Ta will offset losses from the drop in Sao Ta's long position.
The idea behind Tienlen Steel Corp and Sao Ta Foods 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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