Correlation Between Fine Metal and Turnkey Communication

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

By analyzing existing cross correlation between Fine Metal Technologies and Turnkey Communication Services, you can compare the effects of market volatilities on Fine Metal and Turnkey Communication 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 Fine Metal with a short position of Turnkey Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fine Metal and Turnkey Communication.

Diversification Opportunities for Fine Metal and Turnkey Communication

0.77

Correlation Coefficient

Fine Metal  Turnkey Communication

Poor diversification

The 3 months correlation between Fine and Turnkey is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fine Metal Technologies and Turnkey Communication Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Turnkey Communication and Fine Metal 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 Fine Metal Technologies are associated (or correlated) with Turnkey Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Turnkey Communication has no effect on the direction of Fine Metal i.e., Fine Metal and Turnkey Communication go up and down completely randomly.

Pair Corralation between Fine Metal and Turnkey Communication

Assuming the 90 days trading horizon Fine Metal is expected to generate 4.83 times less return on investment than Turnkey Communication. But when comparing it to its historical volatility, Fine Metal Technologies is 3.04 times less risky than Turnkey Communication. It trades about 0.19 of its potential returns per unit of risk. Turnkey Communication Services is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  1,040  in Turnkey Communication Services on October 6, 2024 and sell it today you would earn a total of  160.00  from holding Turnkey Communication Services or generate 15.38% return on investment over 90 days.

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

Fine Metal Technologies  vs.  Turnkey Communication Services

Fine Metal Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Metal Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Fine Metal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Turnkey Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Turnkey Communication Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Fine Metal and Turnkey Communication

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

The idea behind Fine Metal Technologies and Turnkey Communication Services 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.