Correlation Between American Green and Vapor

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

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

Diversification Opportunities for American Green and Vapor

0.52

Correlation Coefficient

American Green  Vapor

Very weak diversification

The 3 months correlation between American and Vapor is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Green and Vapor Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vapor Group and American Green 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 American Green are associated (or correlated) with Vapor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vapor Group has no effect on the direction of American Green i.e., American Green and Vapor go up and down completely randomly.

Pair Corralation between American Green and Vapor

Given the investment horizon of 90 days American Green is expected to generate 68.62 times less return on investment than Vapor. But when comparing it to its historical volatility, American Green is 8.84 times less risky than Vapor. It trades about 0.01 of its potential returns per unit of risk. Vapor Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Vapor Group on December 28, 2024 and sell it today you would lose (0.01) from holding Vapor Group or give up 90.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

American Green  vs.  Vapor Group

American Green

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Green are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, American Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Vapor Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vapor Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Vapor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Green and Vapor

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

The idea behind American Green and Vapor Group 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 Stocks Directory module to find actively traded stocks across global markets.