Correlation Between TMT Steel and G J

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

Diversification Opportunities for TMT Steel and G J

0.69

Correlation Coefficient

TMT Steel  G J

Poor diversification

The 3 months correlation between TMT and GJS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and G J Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G J Steel 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 G J. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G J Steel has no effect on the direction of TMT Steel i.e., TMT Steel and G J go up and down completely randomly.

Pair Corralation between TMT Steel and G J

Assuming the 90 days trading horizon TMT Steel is expected to generate 1.03 times less return on investment than G J. But when comparing it to its historical volatility, TMT Steel Public is 1.0 times less risky than G J. It trades about 0.04 of its potential returns per unit of risk. G J Steel is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  36.00  in G J Steel on September 13, 2024 and sell it today you would lose (20.00) from holding G J Steel or give up 55.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

TMT Steel Public  vs.  G J Steel

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.

G J Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G J Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with TMT Steel and G J

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

The idea behind TMT Steel Public and G J Steel 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.