Correlation Between TMP Steel and Syntek Semiconductor

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

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

Diversification Opportunities for TMP Steel and Syntek Semiconductor

0.45

Correlation Coefficient

TMP Steel  Syntek Semiconductor

Very weak diversification

The 3 months correlation between TMP and Syntek is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding TMP Steel and Syntek Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syntek Semiconductor 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 Syntek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syntek Semiconductor has no effect on the direction of TMP Steel i.e., TMP Steel and Syntek Semiconductor go up and down completely randomly.

Pair Corralation between TMP Steel and Syntek Semiconductor

Assuming the 90 days trading horizon TMP Steel is expected to generate 0.37 times more return on investment than Syntek Semiconductor. However, TMP Steel is 2.7 times less risky than Syntek Semiconductor. It trades about 0.04 of its potential returns per unit of risk. Syntek Semiconductor Co is currently generating about -0.02 per unit of risk. If you would invest  2,715  in TMP Steel on December 30, 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

TMP Steel  vs.  Syntek Semiconductor Co

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.

Syntek Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Syntek Semiconductor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Syntek Semiconductor 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 TMP Steel and Syntek Semiconductor

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

The idea behind TMP Steel and Syntek Semiconductor Co 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.