Correlation Between TMP Steel and Her Chee

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

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

Diversification Opportunities for TMP Steel and Her Chee

-0.88

Correlation Coefficient

TMP Steel  Her Chee

Pay attention - limited upside

The 3 months correlation between TMP and Her is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding TMP Steel and Her Chee Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Her Chee Industrial and TMP 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 TMP Steel are associated (or correlated) with Her Chee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Her Chee Industrial has no effect on the direction of TMP Steel i.e., TMP Steel and Her Chee go up and down completely randomly.

Pair Corralation between TMP Steel and Her Chee

Assuming the 90 days trading horizon TMP Steel is expected to under-perform the Her Chee. But the stock apears to be less risky and, when comparing its historical volatility, TMP Steel is 3.01 times less risky than Her Chee. The stock trades about -0.09 of its potential returns per unit of risk. The Her Chee Industrial is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  6,570  in Her Chee Industrial on September 4, 2024 and sell it today you would earn a total of  7,430  from holding Her Chee Industrial or generate 113.09% return on investment over 90 days.

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

TMP Steel  vs.  Her Chee Industrial

TMP Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMP Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Her Chee Industrial

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Her Chee Industrial are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Her Chee showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TMP Steel and Her Chee

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

The idea behind TMP Steel and Her Chee Industrial 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..