Correlation Between DingZing Advanced and Tehmag Foods

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

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

Diversification Opportunities for DingZing Advanced and Tehmag Foods

0.71

Correlation Coefficient

DingZing Advanced  Tehmag Foods

Poor diversification

The 3 months correlation between DingZing and Tehmag is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding DingZing Advanced Materials and Tehmag Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tehmag Foods and DingZing Advanced 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 DingZing Advanced Materials 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 DingZing Advanced i.e., DingZing Advanced and Tehmag Foods go up and down completely randomly.

Pair Corralation between DingZing Advanced and Tehmag Foods

Assuming the 90 days trading horizon DingZing Advanced Materials is expected to generate 4.62 times more return on investment than Tehmag Foods. However, DingZing Advanced is 4.62 times more volatile than Tehmag Foods. It trades about 0.09 of its potential returns per unit of risk. Tehmag Foods is currently generating about 0.09 per unit of risk. If you would invest  5,136  in DingZing Advanced Materials on October 11, 2024 and sell it today you would earn a total of  9,914  from holding DingZing Advanced Materials or generate 193.03% return on investment over 90 days.

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

DingZing Advanced Materials  vs.  Tehmag Foods

DingZing Advanced

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DingZing Advanced Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, DingZing Advanced may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with DingZing Advanced and Tehmag Foods

The main advantage of trading using opposite DingZing Advanced and Tehmag Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DingZing Advanced 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 DingZing Advanced Materials 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.