Correlation Between CGE Energy and Green Stream

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

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

Diversification Opportunities for CGE Energy and Green Stream

1.0

Correlation Coefficient

CGE Energy  Green Stream

No risk reduction

The 3 months correlation between CGE and Green is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding CGE Energy and Green Stream Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Stream Holdings and CGE Energy 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 CGE Energy are associated (or correlated) with Green Stream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Stream Holdings has no effect on the direction of CGE Energy i.e., CGE Energy and Green Stream go up and down completely randomly.

Pair Corralation between CGE Energy and Green Stream

Given the investment horizon of 90 days CGE Energy is expected to generate 18.58 times less return on investment than Green Stream. But when comparing it to its historical volatility, CGE Energy is 5.5 times less risky than Green Stream. It trades about 0.04 of its potential returns per unit of risk. Green Stream Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Green Stream Holdings on September 3, 2024 and sell it today you would lose (0.02) from holding Green Stream Holdings or give up 66.67% of portfolio value over 90 days.

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

CGE Energy  vs.  Green Stream Holdings

CGE Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CGE Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, CGE Energy is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Green Stream Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Stream Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Green Stream is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CGE Energy and Green Stream

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

The idea behind CGE Energy and Green Stream Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..