Correlation Between TMP Steel and MetaTech

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

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

Diversification Opportunities for TMP Steel and MetaTech

-0.17

Correlation Coefficient

TMP Steel  MetaTech

Good diversification

The 3 months correlation between TMP and MetaTech is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding TMP Steel and MetaTech AP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetaTech AP and TMP 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 TMP Steel are associated (or correlated) with MetaTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetaTech AP has no effect on the direction of TMP Steel i.e., TMP Steel and MetaTech go up and down completely randomly.

Pair Corralation between TMP Steel and MetaTech

Assuming the 90 days trading horizon TMP Steel is expected to generate 0.51 times more return on investment than MetaTech. However, TMP Steel is 1.94 times less risky than MetaTech. It trades about 0.03 of its potential returns per unit of risk. MetaTech AP is currently generating about -0.1 per unit of risk. If you would invest  2,740  in TMP Steel on October 24, 2024 and sell it today you would earn a total of  10.00  from holding TMP Steel or generate 0.36% return on investment over 90 days.

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

TMP Steel  vs.  MetaTech AP

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 latest weak 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.

MetaTech AP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MetaTech AP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, MetaTech is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with TMP Steel and MetaTech

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

The idea behind TMP Steel and MetaTech AP 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.