Correlation Between SEED and TANGANDA TEA

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

By analyzing existing cross correlation between SEED LIMITED and TANGANDA TEA PANY, you can compare the effects of market volatilities on SEED and TANGANDA TEA 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 SEED with a short position of TANGANDA TEA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEED and TANGANDA TEA.

Diversification Opportunities for SEED and TANGANDA TEA

0.22

Correlation Coefficient

SEED  TANGANDA TEA

Modest diversification

The 3 months correlation between SEED and TANGANDA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SEED LIMITED and TANGANDA TEA PANY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TANGANDA TEA PANY and SEED 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 SEED LIMITED are associated (or correlated) with TANGANDA TEA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TANGANDA TEA PANY has no effect on the direction of SEED i.e., SEED and TANGANDA TEA go up and down completely randomly.

Pair Corralation between SEED and TANGANDA TEA

Assuming the 90 days trading horizon SEED LIMITED is expected to under-perform the TANGANDA TEA. But the stock apears to be less risky and, when comparing its historical volatility, SEED LIMITED is 1.37 times less risky than TANGANDA TEA. The stock trades about -0.3 of its potential returns per unit of risk. The TANGANDA TEA PANY is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  18,157  in TANGANDA TEA PANY on October 12, 2024 and sell it today you would earn a total of  3,363  from holding TANGANDA TEA PANY or generate 18.52% return on investment over 90 days.

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

SEED LIMITED  vs.  TANGANDA TEA PANY

SEED LIMITED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEED LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

TANGANDA TEA PANY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TANGANDA TEA PANY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, TANGANDA TEA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SEED and TANGANDA TEA

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

The idea behind SEED LIMITED and TANGANDA TEA PANY 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.