Correlation Between Tienlen Steel and Transport

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

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

Diversification Opportunities for Tienlen Steel and Transport

0.74

Correlation Coefficient

Tienlen Steel  Transport

Poor diversification

The 3 months correlation between Tienlen and Transport is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Tienlen Steel Corp and Transport and Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport and Industry and Tienlen 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 Tienlen Steel Corp are associated (or correlated) with Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport and Industry has no effect on the direction of Tienlen Steel i.e., Tienlen Steel and Transport go up and down completely randomly.

Pair Corralation between Tienlen Steel and Transport

Assuming the 90 days trading horizon Tienlen Steel Corp is expected to generate 0.78 times more return on investment than Transport. However, Tienlen Steel Corp is 1.28 times less risky than Transport. It trades about -0.17 of its potential returns per unit of risk. Transport and Industry is currently generating about -0.2 per unit of risk. If you would invest  551,000  in Tienlen Steel Corp on September 15, 2024 and sell it today you would lose (83,000) from holding Tienlen Steel Corp or give up 15.06% of portfolio value over 90 days.

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

Tienlen Steel Corp  vs.  Transport and Industry

Tienlen Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tienlen Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical 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.

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport and Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental 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.

Pair Trading with Tienlen Steel and Transport

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

The idea behind Tienlen Steel Corp and Transport and Industry 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.