Correlation Between TMT Steel and Regional Container

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

Diversification Opportunities for TMT Steel and Regional Container

-0.69

Correlation Coefficient

TMT Steel  Regional Container

Excellent diversification

The 3 months correlation between TMT and Regional is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Regional Container Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Container Lines 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 Regional Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Container Lines has no effect on the direction of TMT Steel i.e., TMT Steel and Regional Container go up and down completely randomly.

Pair Corralation between TMT Steel and Regional Container

Assuming the 90 days trading horizon TMT Steel Public is expected to under-perform the Regional Container. But the stock apears to be less risky and, when comparing its historical volatility, TMT Steel Public is 1.11 times less risky than Regional Container. The stock trades about -0.13 of its potential returns per unit of risk. The Regional Container Lines is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,198  in Regional Container Lines on September 13, 2024 and sell it today you would earn a total of  627.00  from holding Regional Container Lines or generate 28.53% return on investment over 90 days.

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

TMT Steel Public  vs.  Regional Container Lines

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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Regional Container Lines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Regional Container disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TMT Steel and Regional Container

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

The idea behind TMT Steel Public and Regional Container Lines 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.