Correlation Between Tehmag Foods and Universal Vision

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

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

Diversification Opportunities for Tehmag Foods and Universal Vision

0.8

Correlation Coefficient

Tehmag Foods  Universal Vision

Very poor diversification

The 3 months correlation between Tehmag and Universal is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tehmag Foods and Universal Vision Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Vision Bio 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 Universal Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Vision Bio has no effect on the direction of Tehmag Foods i.e., Tehmag Foods and Universal Vision go up and down completely randomly.

Pair Corralation between Tehmag Foods and Universal Vision

Assuming the 90 days trading horizon Tehmag Foods is expected to generate 5.12 times less return on investment than Universal Vision. But when comparing it to its historical volatility, Tehmag Foods is 2.4 times less risky than Universal Vision. It trades about 0.06 of its potential returns per unit of risk. Universal Vision Biotechnology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  20,200  in Universal Vision Biotechnology on December 24, 2024 and sell it today you would earn a total of  2,800  from holding Universal Vision Biotechnology or generate 13.86% return on investment over 90 days.

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

Tehmag Foods  vs.  Universal Vision Biotechnology

Tehmag Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tehmag Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Universal Vision Bio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Vision Biotechnology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Universal Vision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tehmag Foods and Universal Vision

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

The idea behind Tehmag Foods and Universal Vision 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.