Correlation Between TMT Steel and WICE Logistics

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

Diversification Opportunities for TMT Steel and WICE Logistics

0.92

Correlation Coefficient

TMT Steel  WICE Logistics

Almost no diversification

The 3 months correlation between TMT and WICE is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and WICE Logistics PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WICE Logistics PCL 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 WICE Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WICE Logistics PCL has no effect on the direction of TMT Steel i.e., TMT Steel and WICE Logistics go up and down completely randomly.

Pair Corralation between TMT Steel and WICE Logistics

Assuming the 90 days trading horizon TMT Steel Public is expected to generate 1.07 times more return on investment than WICE Logistics. However, TMT Steel is 1.07 times more volatile than WICE Logistics PCL. It trades about -0.13 of its potential returns per unit of risk. WICE Logistics PCL is currently generating about -0.19 per unit of risk. If you would invest  414.00  in TMT Steel Public on September 13, 2024 and sell it today you would lose (90.00) from holding TMT Steel Public or give up 21.74% of portfolio value over 90 days.

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

TMT Steel Public  vs.  WICE Logistics PCL

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.

WICE Logistics PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WICE Logistics PCL 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 forward-looking signals 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.

Pair Trading with TMT Steel and WICE Logistics

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

The idea behind TMT Steel Public and WICE Logistics PCL 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.