Correlation Between Total Transport and Steel Authority

Can any of the company-specific risk be diversified away by investing in both Total Transport and Steel Authority 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 Total Transport and Steel Authority into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Total Transport Systems and Steel Authority of, you can compare the effects of market volatilities on Total Transport and Steel Authority 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 Total Transport with a short position of Steel Authority. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Transport and Steel Authority.

Diversification Opportunities for Total Transport and Steel Authority

0.75

Correlation Coefficient

Total Transport  Steel Authority

Poor diversification

The 3 months correlation between Total and Steel is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Total Transport Systems and Steel Authority of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Authority and Total Transport 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 Total Transport Systems are associated (or correlated) with Steel Authority. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Authority has no effect on the direction of Total Transport i.e., Total Transport and Steel Authority go up and down completely randomly.

Pair Corralation between Total Transport and Steel Authority

Assuming the 90 days trading horizon Total Transport Systems is expected to generate 1.73 times more return on investment than Steel Authority. However, Total Transport is 1.73 times more volatile than Steel Authority of. It trades about 0.15 of its potential returns per unit of risk. Steel Authority of is currently generating about 0.24 per unit of risk. If you would invest  7,220  in Total Transport Systems on September 20, 2024 and sell it today you would earn a total of  579.00  from holding Total Transport Systems or generate 8.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Total Transport Systems  vs.  Steel Authority of

Total Transport Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Transport Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Steel Authority

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Authority of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Steel Authority is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Total Transport and Steel Authority

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

The idea behind Total Transport Systems and Steel Authority of 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.