Correlation Between OK ZIMBABWE and TANGANDA TEA

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

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

Diversification Opportunities for OK ZIMBABWE and TANGANDA TEA

-0.12

Correlation Coefficient

OK ZIMBABWE  TANGANDA TEA

Good diversification

The 3 months correlation between OKZ and TANGANDA is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding OK ZIMBABWE 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 OK ZIMBABWE 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 OK ZIMBABWE 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 OK ZIMBABWE i.e., OK ZIMBABWE and TANGANDA TEA go up and down completely randomly.

Pair Corralation between OK ZIMBABWE and TANGANDA TEA

Assuming the 90 days trading horizon OK ZIMBABWE LIMITED is expected to under-perform the TANGANDA TEA. But the stock apears to be less risky and, when comparing its historical volatility, OK ZIMBABWE LIMITED is 1.38 times less risky than TANGANDA TEA. The stock trades about -0.12 of its potential returns per unit of risk. The TANGANDA TEA PANY is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  37,025  in TANGANDA TEA PANY on September 28, 2024 and sell it today you would lose (7,545) from holding TANGANDA TEA PANY or give up 20.38% of portfolio value over 90 days.

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

OK ZIMBABWE LIMITED  vs.  TANGANDA TEA PANY

OK ZIMBABWE LIMITED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OK ZIMBABWE LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 OK ZIMBABWE and TANGANDA TEA

The main advantage of trading using opposite OK ZIMBABWE and TANGANDA TEA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OK ZIMBABWE 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 OK ZIMBABWE 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.