Correlation Between Delta Manufacturing and Tembo Global

Can any of the company-specific risk be diversified away by investing in both Delta Manufacturing and Tembo Global 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 Delta Manufacturing and Tembo Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Delta Manufacturing Limited and Tembo Global Industries, you can compare the effects of market volatilities on Delta Manufacturing and Tembo Global 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 Delta Manufacturing with a short position of Tembo Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Manufacturing and Tembo Global.

Diversification Opportunities for Delta Manufacturing and Tembo Global

0.65

Correlation Coefficient

Delta Manufacturing  Tembo Global

Poor diversification

The 3 months correlation between Delta and Tembo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Delta Manufacturing Limited and Tembo Global Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tembo Global Industries and Delta Manufacturing 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 Delta Manufacturing Limited are associated (or correlated) with Tembo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tembo Global Industries has no effect on the direction of Delta Manufacturing i.e., Delta Manufacturing and Tembo Global go up and down completely randomly.

Pair Corralation between Delta Manufacturing and Tembo Global

Assuming the 90 days trading horizon Delta Manufacturing is expected to generate 3.04 times less return on investment than Tembo Global. In addition to that, Delta Manufacturing is 1.26 times more volatile than Tembo Global Industries. It trades about 0.07 of its total potential returns per unit of risk. Tembo Global Industries is currently generating about 0.25 per unit of volatility. If you would invest  49,020  in Tembo Global Industries on October 10, 2024 and sell it today you would earn a total of  30,550  from holding Tembo Global Industries or generate 62.32% return on investment over 90 days.

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

Delta Manufacturing Limited  vs.  Tembo Global Industries

Delta Manufacturing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Manufacturing Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Delta Manufacturing sustained solid returns over the last few months and may actually be approaching a breakup point.

Tembo Global Industries

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tembo Global Industries are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Tembo Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Manufacturing and Tembo Global

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

The idea behind Delta Manufacturing Limited and Tembo Global Industries 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.