Correlation Between TMT Steel and Permsin Steel

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

Diversification Opportunities for TMT Steel and Permsin Steel

0.89

Correlation Coefficient

TMT Steel  Permsin Steel

Very poor diversification

The 3 months correlation between TMT and Permsin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Permsin Steel Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permsin Steel Works 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 Permsin Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permsin Steel Works has no effect on the direction of TMT Steel i.e., TMT Steel and Permsin Steel go up and down completely randomly.

Pair Corralation between TMT Steel and Permsin Steel

Assuming the 90 days trading horizon TMT Steel Public is expected to under-perform the Permsin Steel. In addition to that, TMT Steel is 1.09 times more volatile than Permsin Steel Works. It trades about -0.13 of its total potential returns per unit of risk. Permsin Steel Works is currently generating about -0.09 per unit of volatility. If you would invest  73.00  in Permsin Steel Works on September 14, 2024 and sell it today you would lose (11.00) from holding Permsin Steel Works or give up 15.07% 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.  Permsin Steel Works

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.

Permsin Steel Works

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permsin Steel Works 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 forward-looking signals 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 Permsin Steel

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

The idea behind TMT Steel Public and Permsin Steel Works 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.