Correlation Between Tembo Global and GACM Technologies

Can any of the company-specific risk be diversified away by investing in both Tembo Global and GACM Technologies 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 GACM Technologies 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 GACM Technologies Limited, you can compare the effects of market volatilities on Tembo Global and GACM Technologies 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 GACM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tembo Global and GACM Technologies.

Diversification Opportunities for Tembo Global and GACM Technologies

-0.31

Correlation Coefficient

Tembo Global  GACM Technologies

Very good diversification

The 3 months correlation between Tembo and GACM is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tembo Global Industries and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies 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 GACM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GACM Technologies has no effect on the direction of Tembo Global i.e., Tembo Global and GACM Technologies go up and down completely randomly.

Pair Corralation between Tembo Global and GACM Technologies

Assuming the 90 days trading horizon Tembo Global Industries is expected to generate 4.0 times more return on investment than GACM Technologies. However, Tembo Global is 4.0 times more volatile than GACM Technologies Limited. It trades about 0.06 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.19 per unit of risk. If you would invest  76,500  in Tembo Global Industries on October 10, 2024 and sell it today you would earn a total of  3,070  from holding Tembo Global Industries or generate 4.01% return on investment over 90 days.

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

Tembo Global Industries  vs.  GACM Technologies Limited

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.

GACM Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GACM Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Tembo Global and GACM Technologies

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

The idea behind Tembo Global Industries and GACM Technologies 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.