Correlation Between Hi Lai and Tehmag Foods

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

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

Diversification Opportunities for Hi Lai and Tehmag Foods

0.63

Correlation Coefficient

Hi Lai  Tehmag Foods

Poor diversification

The 3 months correlation between 1268 and Tehmag is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hi Lai Foods Co and Tehmag Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tehmag Foods and Hi Lai 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 Hi Lai Foods Co 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 Hi Lai i.e., Hi Lai and Tehmag Foods go up and down completely randomly.

Pair Corralation between Hi Lai and Tehmag Foods

Assuming the 90 days trading horizon Hi Lai Foods Co is expected to generate 2.28 times more return on investment than Tehmag Foods. However, Hi Lai is 2.28 times more volatile than Tehmag Foods. It trades about 0.04 of its potential returns per unit of risk. Tehmag Foods is currently generating about 0.1 per unit of risk. If you would invest  11,707  in Hi Lai Foods Co on December 5, 2024 and sell it today you would earn a total of  3,643  from holding Hi Lai Foods Co or generate 31.12% return on investment over 90 days.

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

Hi Lai Foods Co  vs.  Tehmag Foods

Hi Lai Foods

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hi Lai Foods Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hi Lai 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 Hi Lai and Tehmag Foods

The main advantage of trading using opposite Hi Lai and Tehmag Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hi Lai 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 Hi Lai Foods Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.