Correlation Between Encore Wire and TTM Technologies

Can any of the company-specific risk be diversified away by investing in both Encore Wire and TTM Technologies 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 Encore Wire and TTM Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Encore Wire and TTM Technologies, you can compare the effects of market volatilities on Encore Wire and TTM Technologies 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 Encore Wire with a short position of TTM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Wire and TTM Technologies.

Diversification Opportunities for Encore Wire and TTM Technologies

0.59

Correlation Coefficient

Encore Wire  TTM Technologies

Very weak diversification

The 3 months correlation between Encore and TTM is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Encore Wire and TTM Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTM Technologies and Encore Wire 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 Encore Wire are associated (or correlated) with TTM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTM Technologies has no effect on the direction of Encore Wire i.e., Encore Wire and TTM Technologies go up and down completely randomly.

Pair Corralation between Encore Wire and TTM Technologies

If you would invest  1,821  in TTM Technologies on September 16, 2024 and sell it today you would earn a total of  753.00  from holding TTM Technologies or generate 41.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.54%
Values	Daily Returns

Encore Wire  vs.  TTM Technologies

Encore Wire

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encore Wire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Encore Wire is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

TTM Technologies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TTM Technologies are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating primary indicators, TTM Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Encore Wire and TTM Technologies

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

The idea behind Encore Wire and TTM Technologies 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.