Correlation Between AFRICAN DISTILLERS and TANGANDA TEA

Can any of the company-specific risk be diversified away by investing in both AFRICAN DISTILLERS and TANGANDA TEA 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 AFRICAN DISTILLERS and TANGANDA TEA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AFRICAN DISTILLERS LIMITED and TANGANDA TEA PANY, you can compare the effects of market volatilities on AFRICAN DISTILLERS and TANGANDA TEA 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 AFRICAN DISTILLERS with a short position of TANGANDA TEA. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFRICAN DISTILLERS and TANGANDA TEA.

Diversification Opportunities for AFRICAN DISTILLERS and TANGANDA TEA

0.31

Correlation Coefficient

AFRICAN DISTILLERS  TANGANDA TEA

Weak diversification

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

Pair Corralation between AFRICAN DISTILLERS and TANGANDA TEA

Assuming the 90 days trading horizon AFRICAN DISTILLERS LIMITED is expected to generate 0.52 times more return on investment than TANGANDA TEA. However, AFRICAN DISTILLERS LIMITED is 1.93 times less risky than TANGANDA TEA. It trades about 0.01 of its potential returns per unit of risk. TANGANDA TEA PANY is currently generating about -0.02 per unit of risk. If you would invest  70,000  in AFRICAN DISTILLERS LIMITED on September 28, 2024 and sell it today you would lose (900.00) from holding AFRICAN DISTILLERS LIMITED or give up 1.29% of portfolio value over 90 days.

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

AFRICAN DISTILLERS LIMITED  vs.  TANGANDA TEA PANY

AFRICAN DISTILLERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFRICAN DISTILLERS LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, AFRICAN DISTILLERS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

TANGANDA TEA PANY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TANGANDA TEA PANY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with AFRICAN DISTILLERS and TANGANDA TEA

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

The idea behind AFRICAN DISTILLERS LIMITED and TANGANDA TEA PANY 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.