Correlation Between TMT Steel and Eastern Technical
Can any of the company-specific risk be diversified away by investing in both TMT Steel and Eastern Technical 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 TMT Steel and Eastern Technical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TMT Steel Public and Eastern Technical Engineering, you can compare the effects of market volatilities on TMT Steel and Eastern Technical 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 TMT Steel with a short position of Eastern Technical. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMT Steel and Eastern Technical.
Diversification Opportunities for TMT Steel and Eastern Technical
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between TMT and Eastern is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Eastern Technical Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Technical and TMT 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 TMT Steel Public are associated (or correlated) with Eastern Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Technical has no effect on the direction of TMT Steel i.e., TMT Steel and Eastern Technical go up and down completely randomly.
Pair Corralation between TMT Steel and Eastern Technical
Assuming the 90 days trading horizon TMT Steel Public is expected to under-perform the Eastern Technical. But the stock apears to be less risky and, when comparing its historical volatility, TMT Steel Public is 1.62 times less risky than Eastern Technical. The stock trades about -1.0 of its potential returns per unit of risk. The Eastern Technical Engineering is currently generating about -0.33 of returns per unit of risk over similar time horizon. If you would invest 105.00 in Eastern Technical Engineering on August 24, 2024 and sell it today you would lose (13.00) from holding Eastern Technical Engineering or give up 12.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
TMT Steel Public vs. Eastern Technical Engineering
Performance |
| Timeline |
| TMT Steel Public |
| Eastern Technical |
TMT Steel and Eastern Technical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TMT Steel and Eastern Technical
The main advantage of trading using opposite TMT Steel and Eastern Technical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMT Steel position performs unexpectedly, Eastern Technical 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 Eastern Technical will offset losses from the drop in Eastern Technical's long position.| TMT Steel vs. PTT Public | TMT Steel vs. PTT Exploration and | TMT Steel vs. The Siam Cement | TMT Steel vs. CP ALL Public |
| Eastern Technical vs. G Capital Public | Eastern Technical vs. Harn Engineering Solutions | Eastern Technical vs. Fortune Parts Industry | Eastern Technical vs. Hydrotek Public |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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