Correlation Between Korea Ratings and Organic Tea

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

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

Diversification Opportunities for Korea Ratings and Organic Tea

0.88

Correlation Coefficient

Korea Ratings  Organic Tea

Very poor diversification

The 3 months correlation between Korea and Organic is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Korea Ratings Co 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 Korea Ratings 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 Korea Ratings Co 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 Korea Ratings i.e., Korea Ratings and Organic Tea go up and down completely randomly.

Pair Corralation between Korea Ratings and Organic Tea

Assuming the 90 days trading horizon Korea Ratings Co is expected to generate 0.19 times more return on investment than Organic Tea. However, Korea Ratings Co is 5.13 times less risky than Organic Tea. It trades about 0.24 of its potential returns per unit of risk. Organic Tea Cosmetics is currently generating about -0.08 per unit of risk. If you would invest  8,850,000  in Korea Ratings Co on October 17, 2024 and sell it today you would earn a total of  230,000  from holding Korea Ratings Co or generate 2.6% return on investment over 90 days.

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

Korea Ratings Co  vs.  Organic Tea Cosmetics

Korea Ratings

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Ratings Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Ratings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 Korea Ratings and Organic Tea

The main advantage of trading using opposite Korea Ratings and Organic Tea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Ratings 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 Korea Ratings Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.