Correlation Between Simplo Technology and TMP Steel

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

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

Diversification Opportunities for Simplo Technology and TMP Steel

-0.46

Correlation Coefficient

Simplo Technology  TMP Steel

Very good diversification

The 3 months correlation between Simplo and TMP is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Simplo Technology Co and TMP Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMP Steel and Simplo Technology 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 Simplo Technology 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 Simplo Technology i.e., Simplo Technology and TMP Steel go up and down completely randomly.

Pair Corralation between Simplo Technology and TMP Steel

Assuming the 90 days trading horizon Simplo Technology Co is expected to generate 1.99 times more return on investment than TMP Steel. However, Simplo Technology is 1.99 times more volatile than TMP Steel. It trades about 0.07 of its potential returns per unit of risk. TMP Steel is currently generating about -0.24 per unit of risk. If you would invest  35,600  in Simplo Technology Co on September 21, 2024 and sell it today you would earn a total of  3,400  from holding Simplo Technology Co or generate 9.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Simplo Technology Co  vs.  TMP Steel

Simplo Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simplo Technology Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Simplo Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TMP Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMP Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Simplo Technology and TMP Steel

The main advantage of trading using opposite Simplo Technology and TMP Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplo Technology 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 Simplo Technology 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.