Correlation Between TMT Steel and Firetrade Engineering

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

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

Diversification Opportunities for TMT Steel and Firetrade Engineering

-0.35

Correlation Coefficient

TMT Steel  Firetrade Engineering

Very good diversification

The 3 months correlation between TMT and Firetrade is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Firetrade Engineering Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firetrade Engineering and TMT Steel 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 TMT Steel Public are associated (or correlated) with Firetrade Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firetrade Engineering has no effect on the direction of TMT Steel i.e., TMT Steel and Firetrade Engineering go up and down completely randomly.

Pair Corralation between TMT Steel and Firetrade Engineering

Assuming the 90 days trading horizon TMT Steel is expected to generate 1.14 times less return on investment than Firetrade Engineering. In addition to that, TMT Steel is 1.0 times more volatile than Firetrade Engineering Public. It trades about 0.04 of its total potential returns per unit of risk. Firetrade Engineering Public is currently generating about 0.04 per unit of volatility. If you would invest  121.00  in Firetrade Engineering Public on October 21, 2024 and sell it today you would earn a total of  29.00  from holding Firetrade Engineering Public or generate 23.97% return on investment over 90 days.

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

TMT Steel Public  vs.  Firetrade Engineering Public

TMT Steel Public

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's basic 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.

Firetrade Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Firetrade Engineering Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Firetrade Engineering 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 TMT Steel and Firetrade Engineering

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

The idea behind TMT Steel Public and Firetrade Engineering 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.