Correlation Between Global E and Orange Juice

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

By analyzing existing cross correlation between Global E Online and Orange Juice, you can compare the effects of market volatilities on Global E and Orange Juice 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 Global E with a short position of Orange Juice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and Orange Juice.

Diversification Opportunities for Global E and Orange Juice

0.27

Correlation Coefficient

Global E  Orange Juice

Modest diversification

The 3 months correlation between Global and Orange is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Orange Juice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange Juice and Global E 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 Global E Online are associated (or correlated) with Orange Juice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange Juice has no effect on the direction of Global E i.e., Global E and Orange Juice go up and down completely randomly.

Pair Corralation between Global E and Orange Juice

Given the investment horizon of 90 days Global E Online is expected to generate 1.28 times more return on investment than Orange Juice. However, Global E is 1.28 times more volatile than Orange Juice. It trades about -0.09 of its potential returns per unit of risk. Orange Juice is currently generating about -0.33 per unit of risk. If you would invest  5,235  in Global E Online on December 2, 2024 and sell it today you would lose (973.00) from holding Global E Online or give up 18.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Global E Online  vs.  Orange Juice

Global E Online

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global E Online has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Orange Juice

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orange Juice has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Commodity's basic indicators remain fairly 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 Orange Juice investors.

Pair Trading with Global E and Orange Juice

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

The idea behind Global E Online and Orange Juice 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.