Correlation Between Platinum and TMC Industrial

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

By analyzing existing cross correlation between The Platinum Group and TMC Industrial Public, you can compare the effects of market volatilities on Platinum and TMC Industrial 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 Platinum with a short position of TMC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Platinum and TMC Industrial.

Diversification Opportunities for Platinum and TMC Industrial

-0.16

Correlation Coefficient

Platinum  TMC Industrial

Good diversification

The 3 months correlation between Platinum and TMC is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding The Platinum Group and TMC Industrial Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMC Industrial Public and Platinum 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 The Platinum Group are associated (or correlated) with TMC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMC Industrial Public has no effect on the direction of Platinum i.e., Platinum and TMC Industrial go up and down completely randomly.

Pair Corralation between Platinum and TMC Industrial

Assuming the 90 days trading horizon The Platinum Group is expected to generate 0.94 times more return on investment than TMC Industrial. However, The Platinum Group is 1.07 times less risky than TMC Industrial. It trades about -0.03 of its potential returns per unit of risk. TMC Industrial Public is currently generating about -0.22 per unit of risk. If you would invest  234.00  in The Platinum Group on October 1, 2024 and sell it today you would lose (12.00) from holding The Platinum Group or give up 5.13% of portfolio value over 90 days.

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

The Platinum Group  vs.  TMC Industrial Public

Platinum Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Platinum Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Platinum is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

TMC Industrial Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMC Industrial Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental 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.

Pair Trading with Platinum and TMC Industrial

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

The idea behind The Platinum Group and TMC Industrial Public 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.