Correlation Between Thaire Life and TMT Steel

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

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

Diversification Opportunities for Thaire Life and TMT Steel

0.63

Correlation Coefficient

Thaire Life  TMT Steel

Poor diversification

The 3 months correlation between Thaire and TMT is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Thaire Life Assurance and TMT Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMT Steel Public and Thaire Life 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 Thaire Life Assurance are associated (or correlated) with TMT Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMT Steel Public has no effect on the direction of Thaire Life i.e., Thaire Life and TMT Steel go up and down completely randomly.

Pair Corralation between Thaire Life and TMT Steel

Assuming the 90 days trading horizon Thaire Life Assurance is expected to under-perform the TMT Steel. In addition to that, Thaire Life is 1.28 times more volatile than TMT Steel Public. It trades about -0.02 of its total potential returns per unit of risk. TMT Steel Public is currently generating about 0.0 per unit of volatility. If you would invest  314.00  in TMT Steel Public on December 29, 2024 and sell it today you would lose (4.00) from holding TMT Steel Public or give up 1.27% of portfolio value over 90 days.

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

Thaire Life Assurance  vs.  TMT Steel Public

Thaire Life Assurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thaire Life Assurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Thaire Life is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

TMT Steel Public

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Thaire Life and TMT Steel

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

The idea behind Thaire Life Assurance and TMT Steel 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.