Correlation Between Steel Public and TCM Public

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

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

Diversification Opportunities for Steel Public and TCM Public

0.43

Correlation Coefficient

Steel Public  TCM Public

Very weak diversification

The 3 months correlation between Steel and TCM is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Steel Public and TCM Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCM Public and Steel Public 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 The Steel Public are associated (or correlated) with TCM Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCM Public has no effect on the direction of Steel Public i.e., Steel Public and TCM Public go up and down completely randomly.

Pair Corralation between Steel Public and TCM Public

Assuming the 90 days trading horizon The Steel Public is expected to generate 0.61 times more return on investment than TCM Public. However, The Steel Public is 1.64 times less risky than TCM Public. It trades about -0.06 of its potential returns per unit of risk. TCM Public is currently generating about -0.09 per unit of risk. If you would invest  76.00  in The Steel Public on December 28, 2024 and sell it today you would lose (10.00) from holding The Steel Public or give up 13.16% of portfolio value over 90 days.

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

The Steel Public  vs.  TCM Public

Steel Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Steel Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

TCM Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days TCM Public 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 forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Steel Public and TCM Public

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

The idea behind The Steel Public and TCM Public 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..