Correlation Between America Great and GB Sciences

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

By analyzing existing cross correlation between America Great Health and GB Sciences, you can compare the effects of market volatilities on America Great and GB Sciences 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 America Great with a short position of GB Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of America Great and GB Sciences.

Diversification Opportunities for America Great and GB Sciences

0.74

Correlation Coefficient

America Great  GB Sciences

Poor diversification

The 3 months correlation between America and GBLX is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding America Great Health and GB Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GB Sciences and America Great 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 America Great Health are associated (or correlated) with GB Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GB Sciences has no effect on the direction of America Great i.e., America Great and GB Sciences go up and down completely randomly.

Pair Corralation between America Great and GB Sciences

Given the investment horizon of 90 days America Great Health is expected to generate 0.96 times more return on investment than GB Sciences. However, America Great Health is 1.04 times less risky than GB Sciences. It trades about 0.08 of its potential returns per unit of risk. GB Sciences is currently generating about 0.07 per unit of risk. If you would invest  0.08  in America Great Health on September 16, 2024 and sell it today you would lose (0.07) from holding America Great Health or give up 87.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

America Great Health  vs.  GB Sciences

America Great Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days America Great Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

GB Sciences

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GB Sciences are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, GB Sciences showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with America Great and GB Sciences

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

The idea behind America Great Health and GB Sciences 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.