Correlation Between Tung Ho and Mayer Steel

Can any of the company-specific risk be diversified away by investing in both Tung Ho and Mayer Steel 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 Tung Ho and Mayer Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tung Ho Steel and Mayer Steel Pipe, you can compare the effects of market volatilities on Tung Ho and Mayer Steel 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 Tung Ho with a short position of Mayer Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tung Ho and Mayer Steel.

Diversification Opportunities for Tung Ho and Mayer Steel

0.2

Correlation Coefficient

Tung Ho  Mayer Steel

Modest diversification

The 3 months correlation between Tung and Mayer is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Steel and Mayer Steel Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayer Steel Pipe and Tung Ho 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 Tung Ho Steel are associated (or correlated) with Mayer Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayer Steel Pipe has no effect on the direction of Tung Ho i.e., Tung Ho and Mayer Steel go up and down completely randomly.

Pair Corralation between Tung Ho and Mayer Steel

Assuming the 90 days trading horizon Tung Ho Steel is expected to generate 0.61 times more return on investment than Mayer Steel. However, Tung Ho Steel is 1.65 times less risky than Mayer Steel. It trades about 0.01 of its potential returns per unit of risk. Mayer Steel Pipe is currently generating about -0.08 per unit of risk. If you would invest  6,920  in Tung Ho Steel on September 15, 2024 and sell it today you would earn a total of  90.00  from holding Tung Ho Steel or generate 1.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tung Ho Steel  vs.  Mayer Steel Pipe

Tung Ho Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tung Ho Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Mayer Steel Pipe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mayer Steel Pipe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mayer Steel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Tung Ho and Mayer Steel

The main advantage of trading using opposite Tung Ho and Mayer Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tung Ho position performs unexpectedly, Mayer Steel 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 Mayer Steel will offset losses from the drop in Mayer Steel's long position.

The idea behind Tung Ho Steel and Mayer Steel Pipe 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.