Correlation Between EX PACK and Tangerine Beach

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

By analyzing existing cross correlation between EX PACK RUGATED CARTONS and Tangerine Beach Hotels, you can compare the effects of market volatilities on EX PACK and Tangerine Beach 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 EX PACK with a short position of Tangerine Beach. Check out your portfolio center. Please also check ongoing floating volatility patterns of EX PACK and Tangerine Beach.

Diversification Opportunities for EX PACK and Tangerine Beach

0.79

Correlation Coefficient

EX PACK  Tangerine Beach

Poor diversification

The 3 months correlation between PACKN0000 and Tangerine is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding EX PACK RUGATED CARTONS and Tangerine Beach Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tangerine Beach Hotels and EX PACK 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 EX PACK RUGATED CARTONS are associated (or correlated) with Tangerine Beach. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tangerine Beach Hotels has no effect on the direction of EX PACK i.e., EX PACK and Tangerine Beach go up and down completely randomly.

Pair Corralation between EX PACK and Tangerine Beach

Assuming the 90 days trading horizon EX PACK is expected to generate 3.45 times less return on investment than Tangerine Beach. But when comparing it to its historical volatility, EX PACK RUGATED CARTONS is 1.92 times less risky than Tangerine Beach. It trades about 0.11 of its potential returns per unit of risk. Tangerine Beach Hotels is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,930  in Tangerine Beach Hotels on October 24, 2024 and sell it today you would earn a total of  2,430  from holding Tangerine Beach Hotels or generate 40.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

EX PACK RUGATED CARTONS  vs.  Tangerine Beach Hotels

EX PACK RUGATED

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EX PACK RUGATED CARTONS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EX PACK may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tangerine Beach Hotels

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tangerine Beach Hotels are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tangerine Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EX PACK and Tangerine Beach

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

The idea behind EX PACK RUGATED CARTONS and Tangerine Beach Hotels 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.