Correlation Between Hammer Metals and Torque Metals

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

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

Diversification Opportunities for Hammer Metals and Torque Metals

0.75

Correlation Coefficient

Hammer Metals  Torque Metals

Poor diversification

The 3 months correlation between Hammer and Torque is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hammer Metals and Torque Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torque Metals and Hammer Metals 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 Hammer Metals are associated (or correlated) with Torque Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torque Metals has no effect on the direction of Hammer Metals i.e., Hammer Metals and Torque Metals go up and down completely randomly.

Pair Corralation between Hammer Metals and Torque Metals

Assuming the 90 days trading horizon Hammer Metals is expected to under-perform the Torque Metals. But the stock apears to be less risky and, when comparing its historical volatility, Hammer Metals is 1.1 times less risky than Torque Metals. The stock trades about -0.15 of its potential returns per unit of risk. The Torque Metals is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  7.50  in Torque Metals on October 25, 2024 and sell it today you would lose (1.70) from holding Torque Metals or give up 22.67% of portfolio value over 90 days.

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

Hammer Metals  vs.  Torque Metals

Hammer Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hammer Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Torque Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Torque Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hammer Metals and Torque Metals

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

The idea behind Hammer Metals and Torque Metals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.