Correlation Between Bright Green and Petros Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Bright Green and Petros Pharmaceuticals 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 Petros Pharmaceuticals 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 Petros Pharmaceuticals, you can compare the effects of market volatilities on Bright Green and Petros Pharmaceuticals 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 Petros Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Green and Petros Pharmaceuticals.

Diversification Opportunities for Bright Green and Petros Pharmaceuticals

0.11

Correlation Coefficient

Bright Green  Petros Pharmaceuticals

Average diversification

The 3 months correlation between Bright and Petros is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bright Green Corp and Petros Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petros Pharmaceuticals 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 Petros Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petros Pharmaceuticals has no effect on the direction of Bright Green i.e., Bright Green and Petros Pharmaceuticals go up and down completely randomly.

Pair Corralation between Bright Green and Petros Pharmaceuticals

Given the investment horizon of 90 days Bright Green Corp is expected to under-perform the Petros Pharmaceuticals. In addition to that, Bright Green is 1.18 times more volatile than Petros Pharmaceuticals. It trades about -0.15 of its total potential returns per unit of risk. Petros Pharmaceuticals is currently generating about 0.02 per unit of volatility. If you would invest  43.00  in Petros Pharmaceuticals on September 29, 2024 and sell it today you would lose (8.00) from holding Petros Pharmaceuticals or give up 18.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

Bright Green Corp  vs.  Petros Pharmaceuticals

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.

Petros Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Petros Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Petros Pharmaceuticals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bright Green and Petros Pharmaceuticals

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

The idea behind Bright Green Corp and Petros Pharmaceuticals 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.