Correlation Between Organic Tea and Seah Steel

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

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

Diversification Opportunities for Organic Tea and Seah Steel

0.38

Correlation Coefficient

Organic Tea  Seah Steel

Weak diversification

The 3 months correlation between Organic and Seah is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Organic Tea Cosmetics and Seah Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seah Steel Corp and Organic Tea 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 Organic Tea Cosmetics are associated (or correlated) with Seah Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seah Steel Corp has no effect on the direction of Organic Tea i.e., Organic Tea and Seah Steel go up and down completely randomly.

Pair Corralation between Organic Tea and Seah Steel

Assuming the 90 days trading horizon Organic Tea Cosmetics is expected to generate 21.89 times more return on investment than Seah Steel. However, Organic Tea is 21.89 times more volatile than Seah Steel Corp. It trades about 0.04 of its potential returns per unit of risk. Seah Steel Corp is currently generating about 0.01 per unit of risk. If you would invest  23,200  in Organic Tea Cosmetics on October 27, 2024 and sell it today you would earn a total of  26,900  from holding Organic Tea Cosmetics or generate 115.95% return on investment over 90 days.

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

Organic Tea Cosmetics  vs.  Seah Steel Corp

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.

Seah Steel Corp

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Seah Steel Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seah Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Organic Tea and Seah Steel

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

The idea behind Organic Tea Cosmetics and Seah Steel Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.