Correlation Between Aris Water and Greencore Group

Can any of the company-specific risk be diversified away by investing in both Aris Water and Greencore Group 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 Aris Water and Greencore Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aris Water Solutions and Greencore Group PLC, you can compare the effects of market volatilities on Aris Water and Greencore Group 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 Aris Water with a short position of Greencore Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aris Water and Greencore Group.

Diversification Opportunities for Aris Water and Greencore Group

-0.52

Correlation Coefficient

Aris Water  Greencore Group

Excellent diversification

The 3 months correlation between Aris and Greencore is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Aris Water Solutions and Greencore Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greencore Group PLC and Aris Water 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 Aris Water Solutions are associated (or correlated) with Greencore Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greencore Group PLC has no effect on the direction of Aris Water i.e., Aris Water and Greencore Group go up and down completely randomly.

Pair Corralation between Aris Water and Greencore Group

Given the investment horizon of 90 days Aris Water Solutions is expected to generate 1.65 times more return on investment than Greencore Group. However, Aris Water is 1.65 times more volatile than Greencore Group PLC. It trades about 0.31 of its potential returns per unit of risk. Greencore Group PLC is currently generating about -0.06 per unit of risk. If you would invest  2,461  in Aris Water Solutions on October 23, 2024 and sell it today you would earn a total of  519.00  from holding Aris Water Solutions or generate 21.09% return on investment over 90 days.

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

Aris Water Solutions  vs.  Greencore Group PLC

Aris Water Solutions

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Greencore Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greencore Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Greencore Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aris Water and Greencore Group

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

The idea behind Aris Water Solutions and Greencore Group PLC 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.