Correlation Between TMP Steel and Baotek Industrial

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

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

Diversification Opportunities for TMP Steel and Baotek Industrial

0.78

Correlation Coefficient

TMP Steel  Baotek Industrial

Poor diversification

The 3 months correlation between TMP and Baotek is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding TMP Steel and Baotek Industrial Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baotek Industrial 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 Baotek Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baotek Industrial has no effect on the direction of TMP Steel i.e., TMP Steel and Baotek Industrial go up and down completely randomly.

Pair Corralation between TMP Steel and Baotek Industrial

Assuming the 90 days trading horizon TMP Steel is expected to generate 0.35 times more return on investment than Baotek Industrial. However, TMP Steel is 2.89 times less risky than Baotek Industrial. It trades about -0.4 of its potential returns per unit of risk. Baotek Industrial Materials is currently generating about -0.26 per unit of risk. If you would invest  2,860  in TMP Steel on October 4, 2024 and sell it today you would lose (150.00) from holding TMP Steel or give up 5.24% of portfolio value over 90 days.

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

TMP Steel  vs.  Baotek Industrial Materials

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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Baotek Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baotek Industrial Materials 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with TMP Steel and Baotek Industrial

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

The idea behind TMP Steel and Baotek Industrial Materials 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.