Correlation Between TMT Steel and Sriracha Construction
Can any of the company-specific risk be diversified away by investing in both TMT Steel and Sriracha Construction 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 Sriracha Construction 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 Sriracha Construction Public, you can compare the effects of market volatilities on TMT Steel and Sriracha Construction 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 Sriracha Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMT Steel and Sriracha Construction.
Diversification Opportunities for TMT Steel and Sriracha Construction
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between TMT and Sriracha is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Sriracha Construction Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sriracha Construction 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 Sriracha Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sriracha Construction has no effect on the direction of TMT Steel i.e., TMT Steel and Sriracha Construction go up and down completely randomly.
Pair Corralation between TMT Steel and Sriracha Construction
Assuming the 90 days trading horizon TMT Steel Public is expected to under-perform the Sriracha Construction. But the stock apears to be less risky and, when comparing its historical volatility, TMT Steel Public is 2.22 times less risky than Sriracha Construction. The stock trades about -0.88 of its potential returns per unit of risk. The Sriracha Construction Public is currently generating about -0.37 of returns per unit of risk over similar time horizon. If you would invest 595.00 in Sriracha Construction Public on August 29, 2024 and sell it today you would lose (109.00) from holding Sriracha Construction Public or give up 18.32% 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. Sriracha Construction Public
Performance |
| Timeline |
| TMT Steel Public |
| Sriracha Construction |
TMT Steel and Sriracha Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TMT Steel and Sriracha Construction
The main advantage of trading using opposite TMT Steel and Sriracha Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMT Steel position performs unexpectedly, Sriracha Construction 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 Sriracha Construction will offset losses from the drop in Sriracha Construction's long position.The idea behind TMT Steel Public and Sriracha Construction Public 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.| Sriracha Construction vs. MCS Steel Public | Sriracha Construction vs. Asia Plus Group | Sriracha Construction vs. Lalin Property Public | Sriracha Construction vs. Lam Soon 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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