Correlation Between Micro E and Orange Juice

Can any of the company-specific risk be diversified away by investing in both Micro 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 Micro 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 Micro E mini Russell and Orange Juice, you can compare the effects of market volatilities on Micro 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 Micro E with a short position of Orange Juice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro E and Orange Juice.

Diversification Opportunities for Micro E and Orange Juice

0.82

Correlation Coefficient

Micro E  Orange Juice

Very poor diversification

The 3 months correlation between Micro and Orange is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Micro E mini Russell and Orange Juice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange Juice and Micro 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 Micro E mini Russell 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 Micro E i.e., Micro E and Orange Juice go up and down completely randomly.

Pair Corralation between Micro E and Orange Juice

Assuming the 90 days trading horizon Micro E mini Russell is expected to generate 0.41 times more return on investment than Orange Juice. However, Micro E mini Russell is 2.42 times less risky than Orange Juice. It trades about -0.13 of its potential returns per unit of risk. Orange Juice is currently generating about -0.38 per unit of risk. If you would invest  224,770  in Micro E mini Russell on December 29, 2024 and sell it today you would lose (21,510) from holding Micro E mini Russell or give up 9.57% of portfolio value over 90 days.

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

Micro E mini Russell  vs.  Orange Juice

Micro E mini

Risk-Adjusted Performance

Very Weak

Over the last 90 days Micro E mini Russell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Commodity's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Micro E mini Russell 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 unsteady 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 Micro E and Orange Juice

The main advantage of trading using opposite Micro E and Orange Juice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro 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 Micro E mini Russell 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.