Correlation Between Data International and TMP Steel

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

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

Diversification Opportunities for Data International and TMP Steel

0.55

Correlation Coefficient

Data International  TMP Steel

Very weak diversification

The 3 months correlation between Data and TMP is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Data International Co and TMP Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMP Steel and Data International 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 Data International Co are associated (or correlated) with TMP Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMP Steel has no effect on the direction of Data International i.e., Data International and TMP Steel go up and down completely randomly.

Pair Corralation between Data International and TMP Steel

Assuming the 90 days trading horizon Data International Co is expected to under-perform the TMP Steel. In addition to that, Data International is 4.01 times more volatile than TMP Steel. It trades about -0.01 of its total potential returns per unit of risk. TMP Steel is currently generating about 0.04 per unit of volatility. If you would invest  2,715  in TMP Steel on December 29, 2024 and sell it today you would earn a total of  50.00  from holding TMP Steel or generate 1.84% return on investment over 90 days.

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

Data International Co  vs.  TMP Steel

Data International

Risk-Adjusted Performance

Very Weak

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

TMP Steel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TMP Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, TMP 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 Data International and TMP Steel

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

The idea behind Data International Co and TMP Steel 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.