Correlation Between Green Cross and Prestige Biologics

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

By analyzing existing cross correlation between Green Cross Lab and Prestige Biologics Co, you can compare the effects of market volatilities on Green Cross and Prestige Biologics 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 Prestige Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Cross and Prestige Biologics.

Diversification Opportunities for Green Cross and Prestige Biologics

0.87

Correlation Coefficient

Green Cross  Prestige Biologics

Very poor diversification

The 3 months correlation between Green and Prestige is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Green Cross Lab and Prestige Biologics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Biologics 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 Lab are associated (or correlated) with Prestige Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prestige Biologics has no effect on the direction of Green Cross i.e., Green Cross and Prestige Biologics go up and down completely randomly.

Pair Corralation between Green Cross and Prestige Biologics

Assuming the 90 days trading horizon Green Cross Lab is expected to under-perform the Prestige Biologics. But the stock apears to be less risky and, when comparing its historical volatility, Green Cross Lab is 1.42 times less risky than Prestige Biologics. The stock trades about -0.03 of its potential returns per unit of risk. The Prestige Biologics Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  302,000  in Prestige Biologics Co on September 19, 2024 and sell it today you would earn a total of  218,000  from holding Prestige Biologics Co or generate 72.19% return on investment over 90 days.

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

Green Cross Lab  vs.  Prestige Biologics Co

Green Cross Lab

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Cross Lab 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Prestige Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prestige Biologics Co 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Green Cross and Prestige Biologics

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

The idea behind Green Cross Lab and Prestige Biologics Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..