Correlation Between TMT Steel and Thai Steel

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

Diversification Opportunities for TMT Steel and Thai Steel

0.42

Correlation Coefficient

TMT Steel  Thai Steel

Very weak diversification

The 3 months correlation between TMT and Thai is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Thai Steel Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Steel Cable 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 Thai Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Steel Cable has no effect on the direction of TMT Steel i.e., TMT Steel and Thai Steel go up and down completely randomly.

Pair Corralation between TMT Steel and Thai Steel

Assuming the 90 days trading horizon TMT Steel Public is expected to generate 1.38 times more return on investment than Thai Steel. However, TMT Steel is 1.38 times more volatile than Thai Steel Cable. It trades about 0.08 of its potential returns per unit of risk. Thai Steel Cable is currently generating about -0.11 per unit of risk. If you would invest  318.00  in TMT Steel Public on December 25, 2024 and sell it today you would earn a total of  28.00  from holding TMT Steel Public or generate 8.81% return on investment over 90 days.

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

TMT Steel Public  vs.  Thai Steel Cable

TMT Steel Public

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TMT Steel Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, TMT Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Thai Steel Cable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Steel Cable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with TMT Steel and Thai Steel

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

The idea behind TMT Steel Public and Thai Steel Cable 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.