Correlation Between Orange Juice and Crude Oil

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

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

Diversification Opportunities for Orange Juice and Crude Oil

0.03

Correlation Coefficient

Orange Juice  Crude Oil

Significant diversification

The 3 months correlation between Orange and Crude is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Orange Juice and Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crude Oil and Orange Juice 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 Orange Juice are associated (or correlated) with Crude Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crude Oil has no effect on the direction of Orange Juice i.e., Orange Juice and Crude Oil go up and down completely randomly.

Pair Corralation between Orange Juice and Crude Oil

Assuming the 90 days horizon Orange Juice is expected to under-perform the Crude Oil. In addition to that, Orange Juice is 1.89 times more volatile than Crude Oil. It trades about -0.01 of its total potential returns per unit of risk. Crude Oil is currently generating about 0.1 per unit of volatility. If you would invest  5,807  in Crude Oil on May 7, 2025 and sell it today you would earn a total of  821.00  from holding Crude Oil or generate 14.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Orange Juice  vs.  Crude Oil

Orange Juice

Risk-Adjusted Performance

Weakest

Over the last 90 days Orange Juice has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Orange Juice is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Crude Oil

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Crude Oil are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Crude Oil exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orange Juice and Crude Oil

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

The idea behind Orange Juice and Crude Oil 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.