Correlation Between TMT Steel and KGI Securities

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

Diversification Opportunities for TMT Steel and KGI Securities

0.88

Correlation Coefficient

TMT Steel  KGI Securities

Very poor diversification

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

Pair Corralation between TMT Steel and KGI Securities

Assuming the 90 days trading horizon TMT Steel Public is expected to generate 56.36 times more return on investment than KGI Securities. However, TMT Steel is 56.36 times more volatile than KGI Securities Public. It trades about 0.04 of its potential returns per unit of risk. KGI Securities Public is currently generating about 0.0 per unit of risk. If you would invest  697.00  in TMT Steel Public on September 14, 2024 and sell it today you would lose (375.00) from holding TMT Steel Public or give up 53.8% of portfolio value over 90 days.

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

TMT Steel Public  vs.  KGI Securities Public

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.

KGI Securities Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KGI Securities Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward 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 KGI Securities

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

The idea behind TMT Steel Public and KGI Securities 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.