Correlation Between Dye Durham and GreenPower

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

By analyzing existing cross correlation between Dye Durham and GreenPower Motor, you can compare the effects of market volatilities on Dye Durham and GreenPower 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 Dye Durham with a short position of GreenPower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dye Durham and GreenPower.

Diversification Opportunities for Dye Durham and GreenPower

-0.21

Correlation Coefficient

Dye Durham  GreenPower

Very good diversification

The 3 months correlation between Dye and GreenPower is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dye Durham and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor and Dye Durham 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 Dye Durham are associated (or correlated) with GreenPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPower Motor has no effect on the direction of Dye Durham i.e., Dye Durham and GreenPower go up and down completely randomly.

Pair Corralation between Dye Durham and GreenPower

Assuming the 90 days trading horizon Dye Durham is expected to generate 0.53 times more return on investment than GreenPower. However, Dye Durham is 1.89 times less risky than GreenPower. It trades about 0.18 of its potential returns per unit of risk. GreenPower Motor is currently generating about 0.07 per unit of risk. If you would invest  1,395  in Dye Durham on August 31, 2024 and sell it today you would earn a total of  652.00  from holding Dye Durham or generate 46.74% return on investment over 90 days.

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

Dye Durham  vs.  GreenPower Motor

Dye Durham

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dye Durham are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Dye Durham displayed solid returns over the last few months and may actually be approaching a breakup point.

GreenPower Motor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GreenPower Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, GreenPower showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dye Durham and GreenPower

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

The idea behind Dye Durham and GreenPower Motor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.