Correlation Between Green Cross and Home Center

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

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

Diversification Opportunities for Green Cross and Home Center

-0.29

Correlation Coefficient

Green Cross  Home Center

Very good diversification

The 3 months correlation between Green and Home is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Green Cross Medical and Home Center Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Center Holdings and Green Cross 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 Green Cross Medical are associated (or correlated) with Home Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Center Holdings has no effect on the direction of Green Cross i.e., Green Cross and Home Center go up and down completely randomly.

Pair Corralation between Green Cross and Home Center

Assuming the 90 days trading horizon Green Cross Medical is expected to generate 2.05 times more return on investment than Home Center. However, Green Cross is 2.05 times more volatile than Home Center Holdings. It trades about 0.03 of its potential returns per unit of risk. Home Center Holdings is currently generating about -0.43 per unit of risk. If you would invest  358,000  in Green Cross Medical on December 30, 2024 and sell it today you would earn a total of  12,000  from holding Green Cross Medical or generate 3.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.97%
Values	Daily Returns

Green Cross Medical  vs.  Home Center Holdings

Green Cross Medical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cross Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Green Cross is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Home Center Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Center Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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 the company investors.

Pair Trading with Green Cross and Home Center

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

The idea behind Green Cross Medical and Home Center Holdings 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.