Correlation Between Better World and True Public

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

Diversification Opportunities for Better World and True Public

-0.42

Correlation Coefficient

Better World  True Public

Very good diversification

The 3 months correlation between Better and True is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Better World Green and True Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on True Public 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 True Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of True Public has no effect on the direction of Better World i.e., Better World and True Public go up and down completely randomly.

Pair Corralation between Better World and True Public

Assuming the 90 days trading horizon Better World Green is expected to under-perform the True Public. In addition to that, Better World is 1.71 times more volatile than True Public. It trades about -0.14 of its total potential returns per unit of risk. True Public is currently generating about 0.06 per unit of volatility. If you would invest  1,110  in True Public on December 29, 2024 and sell it today you would earn a total of  90.00  from holding True Public or generate 8.11% return on investment over 90 days.

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

Better World Green  vs.  True Public

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.

True Public

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in True Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, True Public may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Better World and True Public

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

The idea behind Better World Green and True Public 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.