Correlation Between TMT Steel and Pylon Public

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

Diversification Opportunities for TMT Steel and Pylon Public

0.95

Correlation Coefficient

TMT Steel  Pylon Public

Almost no diversification

The 3 months correlation between TMT and Pylon is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding TMT Steel Public and Pylon Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pylon 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 Pylon Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pylon Public has no effect on the direction of TMT Steel i.e., TMT Steel and Pylon Public go up and down completely randomly.

Pair Corralation between TMT Steel and Pylon Public

Assuming the 90 days trading horizon TMT Steel Public is expected to under-perform the Pylon Public. But the stock apears to be less risky and, when comparing its historical volatility, TMT Steel Public is 1.29 times less risky than Pylon Public. The stock trades about -0.42 of its potential returns per unit of risk. The Pylon Public is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  199.00  in Pylon Public on September 15, 2024 and sell it today you would lose (11.00) from holding Pylon Public or give up 5.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

TMT Steel Public  vs.  Pylon 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.

Pylon Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pylon 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 fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with TMT Steel and Pylon Public

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

The idea behind TMT Steel Public and Pylon 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.