Correlation Between Oceanic Beverages and Newretail

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

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

Diversification Opportunities for Oceanic Beverages and Newretail

0.13

Correlation Coefficient

Oceanic Beverages  Newretail

Average diversification

The 3 months correlation between Oceanic and Newretail is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Oceanic Beverages Co and Newretail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newretail and Oceanic Beverages 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 Oceanic Beverages Co are associated (or correlated) with Newretail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newretail has no effect on the direction of Oceanic Beverages i.e., Oceanic Beverages and Newretail go up and down completely randomly.

Pair Corralation between Oceanic Beverages and Newretail

Assuming the 90 days trading horizon Oceanic Beverages Co is expected to generate 0.49 times more return on investment than Newretail. However, Oceanic Beverages Co is 2.02 times less risky than Newretail. It trades about 0.09 of its potential returns per unit of risk. Newretail Co is currently generating about 0.03 per unit of risk. If you would invest  705.00  in Oceanic Beverages Co on September 19, 2024 and sell it today you would earn a total of  865.00  from holding Oceanic Beverages Co or generate 122.7% return on investment over 90 days.

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

Oceanic Beverages Co  vs.  Newretail Co

Oceanic Beverages

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oceanic Beverages Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Oceanic Beverages showed solid returns over the last few months and may actually be approaching a breakup point.

Newretail

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Newretail Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newretail showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oceanic Beverages and Newretail

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

The idea behind Oceanic Beverages Co and Newretail Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.