Correlation Between TMT Steel and Stock Exchange
Can any of the company-specific risk be diversified away by investing in both TMT Steel and Stock Exchange 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 Stock Exchange 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 Stock Exchange Of, you can compare the effects of market volatilities on TMT Steel and Stock Exchange 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 Stock Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMT Steel and Stock Exchange.
Diversification Opportunities for TMT Steel and Stock Exchange
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between TMT and Stock is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Stock Exchange Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stock Exchange 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 Stock Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stock Exchange has no effect on the direction of TMT Steel i.e., TMT Steel and Stock Exchange go up and down completely randomly.
Pair Corralation between TMT Steel and Stock Exchange
Assuming the 90 days trading horizon TMT Steel Public is expected to under-perform the Stock Exchange. In addition to that, TMT Steel is 1.64 times more volatile than Stock Exchange Of. It trades about -0.63 of its total potential returns per unit of risk. Stock Exchange Of is currently generating about -0.26 per unit of volatility. If you would invest 147,032 in Stock Exchange Of on September 22, 2024 and sell it today you would lose (10,525) from holding Stock Exchange Of or give up 7.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TMT Steel Public vs. Stock Exchange Of
Performance |
| Timeline |
TMT Steel and Stock Exchange Volatility Contrast
Predicted Return Density |
| Returns |
TMT Steel Public
Pair trading matchups for TMT Steel
Stock Exchange Of
Pair trading matchups for Stock Exchange
Pair Trading with TMT Steel and Stock Exchange
The main advantage of trading using opposite TMT Steel and Stock Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMT Steel position performs unexpectedly, Stock Exchange 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 Stock Exchange will offset losses from the drop in Stock Exchange's long position.| TMT Steel vs. MCS Steel Public | TMT Steel vs. Thai Vegetable Oil | TMT Steel vs. Pacific Pipe Public | TMT Steel vs. Tipco Foods Public |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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