Correlation Between Better World and G J

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

By analyzing existing cross correlation between Better World Green and G J Steel, you can compare the effects of market volatilities on Better World and G J 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 Better World with a short position of G J. Check out your portfolio center. Please also check ongoing floating volatility patterns of Better World and G J.

Diversification Opportunities for Better World and G J

0.69

Correlation Coefficient

Better World  G J

Poor diversification

The 3 months correlation between Better and GJS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Better World Green and G J Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G J Steel and Better World 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 Better World Green are associated (or correlated) with G J. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G J Steel has no effect on the direction of Better World i.e., Better World and G J go up and down completely randomly.

Pair Corralation between Better World and G J

Assuming the 90 days trading horizon Better World Green is expected to under-perform the G J. But the stock apears to be less risky and, when comparing its historical volatility, Better World Green is 1.67 times less risky than G J. The stock trades about -0.14 of its potential returns per unit of risk. The G J Steel is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  15.00  in G J Steel on December 28, 2024 and sell it today you would lose (2.00) from holding G J Steel or give up 13.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Better World Green  vs.  G J Steel

Better World Green

Risk-Adjusted Performance

Very Weak

Over the last 90 days Better World Green has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

G J Steel

Risk-Adjusted Performance

Weak

Over the last 90 days G J Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, G J is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Better World and G J

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

The idea behind Better World Green and G J Steel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.