Correlation Between Oceanic Beverages and TMP Steel

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Can any of the company-specific risk be diversified away by investing in both Oceanic Beverages and TMP 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 Oceanic Beverages and TMP Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oceanic Beverages Co and TMP Steel, you can compare the effects of market volatilities on Oceanic Beverages and TMP 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 Oceanic Beverages with a short position of TMP Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oceanic Beverages and TMP Steel.

Diversification Opportunities for Oceanic Beverages and TMP Steel

-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between Oceanic and TMP is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Oceanic Beverages Co and TMP Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMP Steel and Oceanic Beverages 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 Oceanic Beverages Co are associated (or correlated) with TMP Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMP Steel has no effect on the direction of Oceanic Beverages i.e., Oceanic Beverages and TMP Steel go up and down completely randomly.

Pair Corralation between Oceanic Beverages and TMP Steel

Assuming the 90 days trading horizon Oceanic Beverages Co is expected to generate 1.16 times more return on investment than TMP Steel. However, Oceanic Beverages is 1.16 times more volatile than TMP Steel. It trades about 0.11 of its potential returns per unit of risk. TMP Steel is currently generating about 0.01 per unit of risk. If you would invest  739.00  in Oceanic Beverages Co on September 14, 2024 and sell it today you would earn a total of  446.00  from holding Oceanic Beverages Co or generate 60.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Oceanic Beverages Co  vs.  TMP Steel

 Performance 
       Timeline  
Oceanic Beverages 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Oceanic Beverages Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Oceanic Beverages is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
TMP Steel 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days TMP Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Oceanic Beverages and TMP Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oceanic Beverages and TMP Steel

The main advantage of trading using opposite Oceanic Beverages and TMP Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oceanic Beverages position performs unexpectedly, TMP 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 TMP Steel will offset losses from the drop in TMP Steel's long position.
The idea behind Oceanic Beverages Co and TMP Steel 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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