Correlation Between Jeju Beer and Green Cross

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

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

Diversification Opportunities for Jeju Beer and Green Cross

-0.28

Correlation Coefficient

Jeju Beer  Green Cross

Very good diversification

The 3 months correlation between Jeju and Green is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and Green Cross Lab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cross Lab and Jeju Beer 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 Jeju Beer Co are associated (or correlated) with Green Cross. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cross Lab has no effect on the direction of Jeju Beer i.e., Jeju Beer and Green Cross go up and down completely randomly.

Pair Corralation between Jeju Beer and Green Cross

Assuming the 90 days trading horizon Jeju Beer Co is expected to under-perform the Green Cross. In addition to that, Jeju Beer is 1.61 times more volatile than Green Cross Lab. It trades about -0.03 of its total potential returns per unit of risk. Green Cross Lab is currently generating about -0.04 per unit of volatility. If you would invest  4,652,693  in Green Cross Lab on October 11, 2024 and sell it today you would lose (2,187,693) from holding Green Cross Lab or give up 47.02% of portfolio value over 90 days.

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

Jeju Beer Co  vs.  Green Cross Lab

Jeju Beer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Beer Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jeju Beer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Green Cross Lab

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Cross Lab 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jeju Beer and Green Cross

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

The idea behind Jeju Beer Co and Green Cross Lab 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.