Correlation Between Tembo Global and Delta Manufacturing

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

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

Diversification Opportunities for Tembo Global and Delta Manufacturing

0.88

Correlation Coefficient

Tembo Global  Delta Manufacturing

Very poor diversification

The 3 months correlation between Tembo and Delta is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tembo Global Industries and Delta Manufacturing Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Manufacturing and Tembo Global 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 Tembo Global Industries are associated (or correlated) with Delta Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Manufacturing has no effect on the direction of Tembo Global i.e., Tembo Global and Delta Manufacturing go up and down completely randomly.

Pair Corralation between Tembo Global and Delta Manufacturing

Assuming the 90 days trading horizon Tembo Global Industries is expected to generate 0.97 times more return on investment than Delta Manufacturing. However, Tembo Global Industries is 1.03 times less risky than Delta Manufacturing. It trades about -0.17 of its potential returns per unit of risk. Delta Manufacturing Limited is currently generating about -0.21 per unit of risk. If you would invest  81,741  in Tembo Global Industries on December 25, 2024 and sell it today you would lose (26,996) from holding Tembo Global Industries or give up 33.03% of portfolio value over 90 days.

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

Tembo Global Industries  vs.  Delta Manufacturing Limited

Tembo Global Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tembo Global Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Delta Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Manufacturing Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tembo Global and Delta Manufacturing

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

The idea behind Tembo Global Industries and Delta Manufacturing Limited 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.