Correlation Between Card Factory and Green River

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

By analyzing existing cross correlation between Card Factory plc and Green River Gold, you can compare the effects of market volatilities on Card Factory and Green River 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 Card Factory with a short position of Green River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Card Factory and Green River.

Diversification Opportunities for Card Factory and Green River

0.68

Correlation Coefficient

Card Factory  Green River

Poor diversification

The 3 months correlation between Card and Green is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Card Factory plc and Green River Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green River Gold and Card Factory 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 Card Factory plc are associated (or correlated) with Green River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green River Gold has no effect on the direction of Card Factory i.e., Card Factory and Green River go up and down completely randomly.

Pair Corralation between Card Factory and Green River

Assuming the 90 days horizon Card Factory is expected to generate 4.72 times less return on investment than Green River. But when comparing it to its historical volatility, Card Factory plc is 6.23 times less risky than Green River. It trades about 0.07 of its potential returns per unit of risk. Green River Gold is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.60  in Green River Gold on September 22, 2024 and sell it today you would lose (2.02) from holding Green River Gold or give up 77.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.22%
Values	Daily Returns

Card Factory plc  vs.  Green River Gold

Card Factory plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Card Factory plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Card Factory is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Green River Gold

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Green River Gold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Green River reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Card Factory and Green River

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

The idea behind Card Factory plc and Green River Gold 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.