Correlation Between Handok Clean and Organic Tea

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

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

Diversification Opportunities for Handok Clean and Organic Tea

-0.74

Correlation Coefficient

Handok Clean  Organic Tea

Pay attention - limited upside

The 3 months correlation between Handok and Organic is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Handok Clean Tech 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 Handok Clean 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 Handok Clean Tech 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 Handok Clean i.e., Handok Clean and Organic Tea go up and down completely randomly.

Pair Corralation between Handok Clean and Organic Tea

Assuming the 90 days trading horizon Handok Clean Tech is expected to generate 0.43 times more return on investment than Organic Tea. However, Handok Clean Tech is 2.31 times less risky than Organic Tea. It trades about 0.0 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  608,801  in Handok Clean Tech on September 28, 2024 and sell it today you would lose (801.00) from holding Handok Clean Tech or give up 0.13% of portfolio value over 90 days.

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

Handok Clean Tech  vs.  Organic Tea Cosmetics

Handok Clean Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Handok Clean Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Handok Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 Handok Clean and Organic Tea

The main advantage of trading using opposite Handok Clean and Organic Tea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Handok Clean 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 Handok Clean Tech 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.