Correlation Between Great Computer and TECO Electric

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

By analyzing existing cross correlation between Great Computer and TECO Electric Machinery, you can compare the effects of market volatilities on Great Computer and TECO Electric 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 TECO Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Computer and TECO Electric.

Diversification Opportunities for Great Computer and TECO Electric

0.64

Correlation Coefficient

Great Computer  TECO Electric

Poor diversification

The 3 months correlation between Great and TECO is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Great Computer and TECO Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TECO Electric Machinery 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 TECO Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TECO Electric Machinery has no effect on the direction of Great Computer i.e., Great Computer and TECO Electric go up and down completely randomly.

Pair Corralation between Great Computer and TECO Electric

Assuming the 90 days trading horizon Great Computer is expected to generate 2.82 times more return on investment than TECO Electric. However, Great Computer is 2.82 times more volatile than TECO Electric Machinery. It trades about 0.08 of its potential returns per unit of risk. TECO Electric Machinery is currently generating about 0.06 per unit of risk. If you would invest  1,595  in Great Computer on September 13, 2024 and sell it today you would earn a total of  265.00  from holding Great Computer or generate 16.61% 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.  TECO Electric Machinery

Great Computer

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Great Computer are ranked lower than 6 (%) 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.

TECO Electric Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TECO Electric Machinery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, TECO Electric is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Great Computer and TECO Electric

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

The idea behind Great Computer and TECO Electric Machinery 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.