Correlation Between Organic Tea and Handok Clean

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

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

Diversification Opportunities for Organic Tea and Handok Clean

-0.74

Correlation Coefficient

Organic Tea  Handok Clean

Pay attention - limited upside

The 3 months correlation between Organic and Handok is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Organic Tea Cosmetics and Handok Clean Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Handok Clean Tech and Organic Tea 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 Organic Tea Cosmetics are associated (or correlated) with Handok Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Handok Clean Tech has no effect on the direction of Organic Tea i.e., Organic Tea and Handok Clean go up and down completely randomly.

Pair Corralation between Organic Tea and Handok Clean

Assuming the 90 days trading horizon Organic Tea Cosmetics is expected to under-perform the Handok Clean. In addition to that, Organic Tea is 2.18 times more volatile than Handok Clean Tech. It trades about -0.41 of its total potential returns per unit of risk. Handok Clean Tech is currently generating about -0.01 per unit of volatility. If you would invest  634,000  in Handok Clean Tech on September 28, 2024 and sell it today you would lose (5,000) from holding Handok Clean Tech or give up 0.79% of portfolio value over 90 days.

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

Organic Tea Cosmetics  vs.  Handok Clean Tech

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.

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.

Pair Trading with Organic Tea and Handok Clean

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

The idea behind Organic Tea Cosmetics and Handok Clean Tech 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.