Correlation Between Well Graded and Teka Construction

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

By analyzing existing cross correlation between Well Graded Engineering and Teka Construction PCL, you can compare the effects of market volatilities on Well Graded and Teka Construction 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 Well Graded with a short position of Teka Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Well Graded and Teka Construction.

Diversification Opportunities for Well Graded and Teka Construction

0.07

Correlation Coefficient

Well Graded  Teka Construction

Significant diversification

The 3 months correlation between Well and Teka is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Well Graded Engineering and Teka Construction PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teka Construction PCL and Well Graded 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 Well Graded Engineering are associated (or correlated) with Teka Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teka Construction PCL has no effect on the direction of Well Graded i.e., Well Graded and Teka Construction go up and down completely randomly.

Pair Corralation between Well Graded and Teka Construction

Assuming the 90 days trading horizon Well Graded Engineering is expected to generate 2.09 times more return on investment than Teka Construction. However, Well Graded is 2.09 times more volatile than Teka Construction PCL. It trades about 0.02 of its potential returns per unit of risk. Teka Construction PCL is currently generating about -0.12 per unit of risk. If you would invest  79.00  in Well Graded Engineering on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Well Graded Engineering or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Well Graded Engineering  vs.  Teka Construction PCL

Well Graded Engineering

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Well Graded Engineering are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Well Graded is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Teka Construction PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teka Construction PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Well Graded and Teka Construction

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

The idea behind Well Graded Engineering and Teka Construction PCL 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.