Correlation Between Gigastorage Corp and Tehmag Foods

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Can any of the company-specific risk be diversified away by investing in both Gigastorage Corp and Tehmag Foods 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 Gigastorage Corp and Tehmag Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gigastorage Corp and Tehmag Foods, you can compare the effects of market volatilities on Gigastorage Corp and Tehmag Foods 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 Gigastorage Corp with a short position of Tehmag Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gigastorage Corp and Tehmag Foods.

Diversification Opportunities for Gigastorage Corp and Tehmag Foods

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Gigastorage and Tehmag is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Gigastorage Corp and Tehmag Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tehmag Foods and Gigastorage Corp 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 Gigastorage Corp are associated (or correlated) with Tehmag Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tehmag Foods has no effect on the direction of Gigastorage Corp i.e., Gigastorage Corp and Tehmag Foods go up and down completely randomly.

Pair Corralation between Gigastorage Corp and Tehmag Foods

Assuming the 90 days trading horizon Gigastorage Corp is expected to under-perform the Tehmag Foods. In addition to that, Gigastorage Corp is 3.24 times more volatile than Tehmag Foods. It trades about -0.01 of its total potential returns per unit of risk. Tehmag Foods is currently generating about 0.08 per unit of volatility. If you would invest  23,588  in Tehmag Foods on September 5, 2024 and sell it today you would earn a total of  6,762  from holding Tehmag Foods or generate 28.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Gigastorage Corp  vs.  Tehmag Foods

 Performance 
       Timeline  
Gigastorage Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gigastorage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.
Tehmag Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Tehmag Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tehmag Foods is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gigastorage Corp and Tehmag Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gigastorage Corp and Tehmag Foods

The main advantage of trading using opposite Gigastorage Corp and Tehmag Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gigastorage Corp position performs unexpectedly, Tehmag Foods 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 Tehmag Foods will offset losses from the drop in Tehmag Foods' long position.
The idea behind Gigastorage Corp and Tehmag Foods 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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