Correlation Between Alton Sports and Organic Tea

Can any of the company-specific risk be diversified away by investing in both Alton Sports and Organic 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 Alton Sports and Organic Tea into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alton Sports CoLtd and Organic Tea Cosmetics, you can compare the effects of market volatilities on Alton Sports and Organic 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 Alton Sports with a short position of Organic Tea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alton Sports and Organic Tea.

Diversification Opportunities for Alton Sports and Organic Tea

-0.72

Correlation Coefficient

Alton Sports  Organic Tea

Pay attention - limited upside

The 3 months correlation between Alton and Organic is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alton Sports CoLtd and Organic Tea Cosmetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organic Tea Cosmetics and Alton Sports 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 Alton Sports CoLtd are associated (or correlated) with Organic Tea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organic Tea Cosmetics has no effect on the direction of Alton Sports i.e., Alton Sports and Organic Tea go up and down completely randomly.

Pair Corralation between Alton Sports and Organic Tea

Assuming the 90 days trading horizon Alton Sports CoLtd is expected to generate 0.71 times more return on investment than Organic Tea. However, Alton Sports CoLtd is 1.42 times less risky than Organic Tea. It trades about -0.02 of its potential returns per unit of risk. Organic Tea Cosmetics is currently generating about -0.46 per unit of risk. If you would invest  146,900  in Alton Sports CoLtd on September 28, 2024 and sell it today you would lose (2,400) from holding Alton Sports CoLtd or give up 1.63% of portfolio value over 90 days.

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

Alton Sports CoLtd  vs.  Organic Tea Cosmetics

Alton Sports CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alton Sports CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Organic Tea Cosmetics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Organic Tea Cosmetics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Organic Tea sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alton Sports and Organic Tea

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

The idea behind Alton Sports CoLtd and Organic Tea Cosmetics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.