Correlation Between Affiliated Resources and Groove Botanicals

Can any of the company-specific risk be diversified away by investing in both Affiliated Resources and Groove Botanicals 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 Affiliated Resources and Groove Botanicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Affiliated Resources Corp and Groove Botanicals, you can compare the effects of market volatilities on Affiliated Resources and Groove Botanicals 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 Affiliated Resources with a short position of Groove Botanicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affiliated Resources and Groove Botanicals.

Diversification Opportunities for Affiliated Resources and Groove Botanicals

0.74

Correlation Coefficient

Affiliated Resources  Groove Botanicals

Poor diversification

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

Pair Corralation between Affiliated Resources and Groove Botanicals

Given the investment horizon of 90 days Affiliated Resources Corp is expected to generate 0.56 times more return on investment than Groove Botanicals. However, Affiliated Resources Corp is 1.78 times less risky than Groove Botanicals. It trades about 0.01 of its potential returns per unit of risk. Groove Botanicals is currently generating about -0.18 per unit of risk. If you would invest  10.00  in Affiliated Resources Corp on September 13, 2024 and sell it today you would lose (1.05) from holding Affiliated Resources Corp or give up 10.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Affiliated Resources Corp  vs.  Groove Botanicals

Affiliated Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Affiliated Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Affiliated Resources is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Groove Botanicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Groove Botanicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Affiliated Resources and Groove Botanicals

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

The idea behind Affiliated Resources Corp and Groove Botanicals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.