Correlation Between TMT Steel and Better World

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

By analyzing existing cross correlation between TMT Steel Public and Better World Green, you can compare the effects of market volatilities on TMT Steel and Better World 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 TMT Steel with a short position of Better World. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMT Steel and Better World.

Diversification Opportunities for TMT Steel and Better World

0.72

Correlation Coefficient

TMT Steel  Better World

Poor diversification

The 3 months correlation between TMT and Better is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Better World Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better World Green and TMT 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 TMT Steel Public are associated (or correlated) with Better World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better World Green has no effect on the direction of TMT Steel i.e., TMT Steel and Better World go up and down completely randomly.

Pair Corralation between TMT Steel and Better World

Assuming the 90 days trading horizon TMT Steel Public is expected to under-perform the Better World. In addition to that, TMT Steel is 1.06 times more volatile than Better World Green. It trades about -0.12 of its total potential returns per unit of risk. Better World Green is currently generating about -0.09 per unit of volatility. If you would invest  50.00  in Better World Green on September 17, 2024 and sell it today you would lose (8.00) from holding Better World Green or give up 16.0% of portfolio value over 90 days.

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

TMT Steel Public  vs.  Better World Green

TMT Steel Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMT Steel Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic 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.

Better World Green

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better World Green has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and 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 TMT Steel and Better World

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

The idea behind TMT Steel Public and Better World Green 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.