Correlation Between TMP Steel and Tacheng Real

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

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

Diversification Opportunities for TMP Steel and Tacheng Real

-0.69

Correlation Coefficient

TMP Steel  Tacheng Real

Excellent diversification

The 3 months correlation between TMP and Tacheng is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding TMP Steel and Tacheng Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tacheng Real Estate 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 Tacheng Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tacheng Real Estate has no effect on the direction of TMP Steel i.e., TMP Steel and Tacheng Real go up and down completely randomly.

Pair Corralation between TMP Steel and Tacheng Real

Assuming the 90 days trading horizon TMP Steel is expected to under-perform the Tacheng Real. But the stock apears to be less risky and, when comparing its historical volatility, TMP Steel is 1.36 times less risky than Tacheng Real. The stock trades about -0.4 of its potential returns per unit of risk. The Tacheng Real Estate is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  4,205  in Tacheng Real Estate on October 4, 2024 and sell it today you would lose (100.00) from holding Tacheng Real Estate or give up 2.38% of portfolio value over 90 days.

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

TMP Steel  vs.  Tacheng Real Estate

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.

Tacheng Real Estate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tacheng Real Estate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tacheng Real may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TMP Steel and Tacheng Real

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

The idea behind TMP Steel and Tacheng Real Estate 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.