Correlation Between TMT Steel and Christiani Nielsen

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Can any of the company-specific risk be diversified away by investing in both TMT Steel and Christiani Nielsen 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 Christiani Nielsen 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 Christiani Nielsen Public, you can compare the effects of market volatilities on TMT Steel and Christiani Nielsen 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 Christiani Nielsen. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMT Steel and Christiani Nielsen.

Diversification Opportunities for TMT Steel and Christiani Nielsen

0.88
  Correlation Coefficient

Very poor diversification

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

Pair Corralation between TMT Steel and Christiani Nielsen

Assuming the 90 days trading horizon TMT Steel is expected to generate 1.05 times less return on investment than Christiani Nielsen. But when comparing it to its historical volatility, TMT Steel Public is 1.0 times less risky than Christiani Nielsen. It trades about 0.04 of its potential returns per unit of risk. Christiani Nielsen Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  173.00  in Christiani Nielsen Public on September 19, 2024 and sell it today you would lose (64.00) from holding Christiani Nielsen Public or give up 36.99% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.78%
ValuesDaily Returns

TMT Steel Public  vs.  Christiani Nielsen Public

 Performance 
       Timeline  
TMT Steel Public 

Risk-Adjusted Performance

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Weak
 
Strong
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.
Christiani Nielsen Public 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Christiani Nielsen 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.

TMT Steel and Christiani Nielsen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TMT Steel and Christiani Nielsen

The main advantage of trading using opposite TMT Steel and Christiani Nielsen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMT Steel position performs unexpectedly, Christiani Nielsen 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 Christiani Nielsen will offset losses from the drop in Christiani Nielsen's long position.
The idea behind TMT Steel Public and Christiani Nielsen 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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