Correlation Between TMT Steel and Halcyon Technology

Can any of the company-specific risk be diversified away by investing in both TMT Steel and Halcyon Technology 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 Halcyon Technology 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 Halcyon Technology Public, you can compare the effects of market volatilities on TMT Steel and Halcyon Technology 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 Halcyon Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMT Steel and Halcyon Technology.

Diversification Opportunities for TMT Steel and Halcyon Technology

0.37

Correlation Coefficient

TMT Steel  Halcyon Technology

Weak diversification

The 3 months correlation between TMT and Halcyon is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Halcyon Technology Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halcyon Technology Public 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 Halcyon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halcyon Technology Public has no effect on the direction of TMT Steel i.e., TMT Steel and Halcyon Technology go up and down completely randomly.

Pair Corralation between TMT Steel and Halcyon Technology

Assuming the 90 days trading horizon TMT Steel Public is expected to generate 0.53 times more return on investment than Halcyon Technology. However, TMT Steel Public is 1.89 times less risky than Halcyon Technology. It trades about 0.0 of its potential returns per unit of risk. Halcyon Technology Public is currently generating about -0.02 per unit of risk. 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

TMT Steel Public  vs.  Halcyon Technology Public

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.

Halcyon Technology Public

Risk-Adjusted Performance

Very Weak

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

Pair Trading with TMT Steel and Halcyon Technology

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

The idea behind TMT Steel Public and Halcyon Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.