Correlation Between Barunson Entertainment and Organic Tea

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

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

Diversification Opportunities for Barunson Entertainment and Organic Tea

0.72

Correlation Coefficient

Barunson Entertainment  Organic Tea

Poor diversification

The 3 months correlation between Barunson and Organic is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Barunson Entertainment Arts 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 Barunson Entertainment 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 Barunson Entertainment Arts 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 Barunson Entertainment i.e., Barunson Entertainment and Organic Tea go up and down completely randomly.

Pair Corralation between Barunson Entertainment and Organic Tea

Assuming the 90 days trading horizon Barunson Entertainment Arts is expected to generate 0.66 times more return on investment than Organic Tea. However, Barunson Entertainment Arts is 1.51 times less risky than Organic Tea. It trades about -0.07 of its potential returns per unit of risk. Organic Tea Cosmetics is currently generating about -0.25 per unit of risk. If you would invest  42,300  in Barunson Entertainment Arts on December 25, 2024 and sell it today you would lose (2,600) from holding Barunson Entertainment Arts or give up 6.15% of portfolio value over 90 days.

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

Barunson Entertainment Arts  vs.  Organic Tea Cosmetics

Barunson Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Barunson Entertainment Arts 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

Very Weak

Over the last 90 days Organic Tea Cosmetics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Barunson Entertainment and Organic Tea

The main advantage of trading using opposite Barunson Entertainment and Organic Tea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barunson Entertainment 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 Barunson Entertainment Arts 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.