Correlation Between Great Computer and Tex Ray

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

By analyzing existing cross correlation between Great Computer and Tex Ray Industrial Co, you can compare the effects of market volatilities on Great Computer and Tex Ray 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 Great Computer with a short position of Tex Ray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Computer and Tex Ray.

Diversification Opportunities for Great Computer and Tex Ray

0.63

Correlation Coefficient

Great Computer  Tex Ray

Poor diversification

The 3 months correlation between Great and Tex is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Great Computer and Tex Ray Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tex Ray Industrial and Great Computer 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 Great Computer are associated (or correlated) with Tex Ray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tex Ray Industrial has no effect on the direction of Great Computer i.e., Great Computer and Tex Ray go up and down completely randomly.

Pair Corralation between Great Computer and Tex Ray

Assuming the 90 days trading horizon Great Computer is expected to under-perform the Tex Ray. In addition to that, Great Computer is 3.42 times more volatile than Tex Ray Industrial Co. It trades about -0.14 of its total potential returns per unit of risk. Tex Ray Industrial Co is currently generating about 0.11 per unit of volatility. If you would invest  1,050  in Tex Ray Industrial Co on September 5, 2024 and sell it today you would earn a total of  35.00  from holding Tex Ray Industrial Co or generate 3.33% return on investment over 90 days.

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

Great Computer  vs.  Tex Ray Industrial Co

Great Computer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Computer are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Great Computer showed solid returns over the last few months and may actually be approaching a breakup point.

Tex Ray Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tex Ray Industrial Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tex Ray may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Great Computer and Tex Ray

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

The idea behind Great Computer and Tex Ray Industrial Co 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.