Correlation Between TMT Steel and Rockworth Public

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

Diversification Opportunities for TMT Steel and Rockworth Public

0.13

Correlation Coefficient

TMT Steel  Rockworth Public

Average diversification

The 3 months correlation between TMT and Rockworth is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Rockworth Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockworth 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 Rockworth Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockworth Public has no effect on the direction of TMT Steel i.e., TMT Steel and Rockworth Public go up and down completely randomly.

Pair Corralation between TMT Steel and Rockworth Public

Assuming the 90 days trading horizon TMT Steel is expected to generate 1.19 times less return on investment than Rockworth Public. But when comparing it to its historical volatility, TMT Steel Public is 1.0 times less risky than Rockworth Public. It trades about 0.04 of its potential returns per unit of risk. Rockworth Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  790.00  in Rockworth Public on October 10, 2024 and sell it today you would earn a total of  270.00  from holding Rockworth Public or generate 34.18% return on investment over 90 days.

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

TMT Steel Public  vs.  Rockworth 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.

Rockworth Public

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rockworth Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Rockworth Public may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TMT Steel and Rockworth Public

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

The idea behind TMT Steel Public and Rockworth 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..