Correlation Between DIO and Green Cross

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

By analyzing existing cross correlation between DIO Corporation and Green Cross Medical, you can compare the effects of market volatilities on DIO and Green Cross 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 DIO with a short position of Green Cross. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIO and Green Cross.

Diversification Opportunities for DIO and Green Cross

0.15

Correlation Coefficient

DIO  Green Cross

Average diversification

The 3 months correlation between DIO and Green is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding DIO Corp. and Green Cross Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cross Medical and DIO 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 DIO Corporation are associated (or correlated) with Green Cross. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cross Medical has no effect on the direction of DIO i.e., DIO and Green Cross go up and down completely randomly.

Pair Corralation between DIO and Green Cross

Assuming the 90 days trading horizon DIO is expected to generate 18.24 times less return on investment than Green Cross. But when comparing it to its historical volatility, DIO Corporation is 3.61 times less risky than Green Cross. It trades about 0.05 of its potential returns per unit of risk. Green Cross Medical is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  349,500  in Green Cross Medical on October 13, 2024 and sell it today you would earn a total of  89,500  from holding Green Cross Medical or generate 25.61% return on investment over 90 days.

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

DIO Corp.  vs.  Green Cross Medical

DIO Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DIO Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DIO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Green Cross Medical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cross Medical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Green Cross sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DIO and Green Cross

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

The idea behind DIO Corporation and Green Cross Medical 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.