Correlation Between TMC Industrial and Central Plaza

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

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

Diversification Opportunities for TMC Industrial and Central Plaza

0.38

Correlation Coefficient

TMC Industrial  Central Plaza

Weak diversification

The 3 months correlation between TMC and Central is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding TMC Industrial Public and Central Plaza Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Plaza Hotel and TMC Industrial 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 TMC Industrial Public are associated (or correlated) with Central Plaza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Plaza Hotel has no effect on the direction of TMC Industrial i.e., TMC Industrial and Central Plaza go up and down completely randomly.

Pair Corralation between TMC Industrial and Central Plaza

Assuming the 90 days trading horizon TMC Industrial Public is expected to under-perform the Central Plaza. But the stock apears to be less risky and, when comparing its historical volatility, TMC Industrial Public is 1.06 times less risky than Central Plaza. The stock trades about -0.19 of its potential returns per unit of risk. The Central Plaza Hotel is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,425  in Central Plaza Hotel on December 30, 2024 and sell it today you would lose (400.00) from holding Central Plaza Hotel or give up 11.68% of portfolio value over 90 days.

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

TMC Industrial Public  vs.  Central Plaza Hotel

TMC Industrial Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days TMC Industrial Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators 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.

Central Plaza Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Plaza Hotel 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TMC Industrial and Central Plaza

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

The idea behind TMC Industrial Public and Central Plaza Hotel 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.