Correlation Between Tehmag Foods and Level Biotechnology

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

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

Diversification Opportunities for Tehmag Foods and Level Biotechnology

0.67

Correlation Coefficient

Tehmag Foods  Level Biotechnology

Poor diversification

The 3 months correlation between Tehmag and Level is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Tehmag Foods and Level Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Level Biotechnology and Tehmag Foods 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 Tehmag Foods are associated (or correlated) with Level Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Level Biotechnology has no effect on the direction of Tehmag Foods i.e., Tehmag Foods and Level Biotechnology go up and down completely randomly.

Pair Corralation between Tehmag Foods and Level Biotechnology

Assuming the 90 days trading horizon Tehmag Foods is expected to under-perform the Level Biotechnology. But the stock apears to be less risky and, when comparing its historical volatility, Tehmag Foods is 1.47 times less risky than Level Biotechnology. The stock trades about -0.13 of its potential returns per unit of risk. The Level Biotechnology is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,270  in Level Biotechnology on September 16, 2024 and sell it today you would lose (15.00) from holding Level Biotechnology or give up 0.46% of portfolio value over 90 days.

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

Tehmag Foods  vs.  Level Biotechnology

Tehmag Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tehmag Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tehmag Foods is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Level Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Level Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Level Biotechnology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Tehmag Foods and Level Biotechnology

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

The idea behind Tehmag Foods and Level Biotechnology 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.