Correlation Between Ten Ren and Oceanic Beverages

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

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

Diversification Opportunities for Ten Ren and Oceanic Beverages

-0.8

Correlation Coefficient

Ten Ren  Oceanic Beverages

Pay attention - limited upside

The 3 months correlation between Ten and Oceanic is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ten Ren Tea and Oceanic Beverages Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oceanic Beverages and Ten Ren 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 Ten Ren Tea are associated (or correlated) with Oceanic Beverages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oceanic Beverages has no effect on the direction of Ten Ren i.e., Ten Ren and Oceanic Beverages go up and down completely randomly.

Pair Corralation between Ten Ren and Oceanic Beverages

Assuming the 90 days trading horizon Ten Ren Tea is expected to under-perform the Oceanic Beverages. But the stock apears to be less risky and, when comparing its historical volatility, Ten Ren Tea is 5.49 times less risky than Oceanic Beverages. The stock trades about -0.17 of its potential returns per unit of risk. The Oceanic Beverages Co is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,195  in Oceanic Beverages Co on October 10, 2024 and sell it today you would earn a total of  290.00  from holding Oceanic Beverages Co or generate 24.27% return on investment over 90 days.

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

Ten Ren Tea  vs.  Oceanic Beverages Co

Ten Ren Tea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ten Ren Tea has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Oceanic Beverages

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oceanic Beverages Co are ranked lower than 10 (%) 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.

Pair Trading with Ten Ren and Oceanic Beverages

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

The idea behind Ten Ren Tea and Oceanic Beverages 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.