Correlation Between Green Cross and DataSolution

Can any of the company-specific risk be diversified away by investing in both Green Cross and DataSolution 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 DataSolution 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 DataSolution, you can compare the effects of market volatilities on Green Cross and DataSolution 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 DataSolution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Cross and DataSolution.

Diversification Opportunities for Green Cross and DataSolution

0.38

Correlation Coefficient

Green Cross  DataSolution

Weak diversification

The 3 months correlation between Green and DataSolution is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Green Cross Medical and DataSolution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DataSolution 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 DataSolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DataSolution has no effect on the direction of Green Cross i.e., Green Cross and DataSolution go up and down completely randomly.

Pair Corralation between Green Cross and DataSolution

Assuming the 90 days trading horizon Green Cross is expected to generate 1.94 times less return on investment than DataSolution. In addition to that, Green Cross is 1.48 times more volatile than DataSolution. It trades about 0.09 of its total potential returns per unit of risk. DataSolution is currently generating about 0.25 per unit of volatility. If you would invest  440,500  in DataSolution on October 25, 2024 and sell it today you would earn a total of  69,500  from holding DataSolution or generate 15.78% return on investment over 90 days.

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

Green Cross Medical  vs.  DataSolution

Green Cross Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Cross Medical has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

DataSolution

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DataSolution are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DataSolution sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Green Cross and DataSolution

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

The idea behind Green Cross Medical and DataSolution 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.