Correlation Between Great Wall and Tehmag Foods

Can any of the company-specific risk be diversified away by investing in both Great Wall and Tehmag Foods 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 Great Wall and Tehmag Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great Wall Enterprise and Tehmag Foods, you can compare the effects of market volatilities on Great Wall and Tehmag Foods 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 Great Wall with a short position of Tehmag Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Tehmag Foods.

Diversification Opportunities for Great Wall and Tehmag Foods

0.28

Correlation Coefficient

Great Wall  Tehmag Foods

Modest diversification

The 3 months correlation between Great and Tehmag is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Tehmag Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tehmag Foods and Great Wall 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 Great Wall Enterprise are associated (or correlated) with Tehmag Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tehmag Foods has no effect on the direction of Great Wall i.e., Great Wall and Tehmag Foods go up and down completely randomly.

Pair Corralation between Great Wall and Tehmag Foods

Assuming the 90 days trading horizon Great Wall is expected to generate 2.92 times less return on investment than Tehmag Foods. In addition to that, Great Wall is 1.81 times more volatile than Tehmag Foods. It trades about 0.07 of its total potential returns per unit of risk. Tehmag Foods is currently generating about 0.36 per unit of volatility. If you would invest  30,200  in Tehmag Foods on December 2, 2024 and sell it today you would earn a total of  3,450  from holding Tehmag Foods or generate 11.42% return on investment over 90 days.

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

Great Wall Enterprise  vs.  Tehmag Foods

Great Wall Enterprise

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Enterprise are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Great Wall is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tehmag Foods

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tehmag Foods are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tehmag Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Great Wall and Tehmag Foods

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

The idea behind Great Wall Enterprise and Tehmag Foods 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.