Correlation Between Green World and Radiant Opto

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

By analyzing existing cross correlation between Green World Fintech and Radiant Opto Electronics Corp, you can compare the effects of market volatilities on Green World and Radiant Opto 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 World with a short position of Radiant Opto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green World and Radiant Opto.

Diversification Opportunities for Green World and Radiant Opto

0.28

Correlation Coefficient

Green World  Radiant Opto

Modest diversification

The 3 months correlation between Green and Radiant is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Green World Fintech and Radiant Opto Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radiant Opto Electro and Green World 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 World Fintech are associated (or correlated) with Radiant Opto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radiant Opto Electro has no effect on the direction of Green World i.e., Green World and Radiant Opto go up and down completely randomly.

Pair Corralation between Green World and Radiant Opto

Assuming the 90 days trading horizon Green World Fintech is expected to generate 2.3 times more return on investment than Radiant Opto. However, Green World is 2.3 times more volatile than Radiant Opto Electronics Corp. It trades about 0.0 of its potential returns per unit of risk. Radiant Opto Electronics Corp is currently generating about -0.06 per unit of risk. If you would invest  6,138  in Green World Fintech on December 29, 2024 and sell it today you would lose (128.00) from holding Green World Fintech or give up 2.09% of portfolio value over 90 days.

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

Green World Fintech  vs.  Radiant Opto Electronics Corp

Green World Fintech

Risk-Adjusted Performance

Very Weak

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

Radiant Opto Electro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Radiant Opto Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Radiant Opto is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Green World and Radiant Opto

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

The idea behind Green World Fintech and Radiant Opto Electronics Corp 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..