Correlation Between Bright Green and Green Thumb

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

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

Diversification Opportunities for Bright Green and Green Thumb

0.65

Correlation Coefficient

Bright Green  Green Thumb

Poor diversification

The 3 months correlation between Bright and Green is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bright Green Corp and Green Thumb Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Thumb Industries and Bright Green 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 Bright Green Corp are associated (or correlated) with Green Thumb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Thumb Industries has no effect on the direction of Bright Green i.e., Bright Green and Green Thumb go up and down completely randomly.

Pair Corralation between Bright Green and Green Thumb

Given the investment horizon of 90 days Bright Green Corp is expected to under-perform the Green Thumb. In addition to that, Bright Green is 7.93 times more volatile than Green Thumb Industries. It trades about -0.23 of its total potential returns per unit of risk. Green Thumb Industries is currently generating about -0.09 per unit of volatility. If you would invest  1,020  in Green Thumb Industries on October 18, 2024 and sell it today you would lose (290.00) from holding Green Thumb Industries or give up 28.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	9.76%
Values	Daily Returns

Bright Green Corp  vs.  Green Thumb Industries

Bright Green Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Green Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bright Green is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Green Thumb Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Thumb Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bright Green and Green Thumb

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

The idea behind Bright Green Corp and Green Thumb Industries 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.