Correlation Between European Residential and GreenFirst Forest

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

By analyzing existing cross correlation between European Residential Real and GreenFirst Forest Products, you can compare the effects of market volatilities on European Residential and GreenFirst Forest 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 European Residential with a short position of GreenFirst Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and GreenFirst Forest.

Diversification Opportunities for European Residential and GreenFirst Forest

0.29

Correlation Coefficient

European Residential  GreenFirst Forest

Modest diversification

The 3 months correlation between European and GreenFirst is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and GreenFirst Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenFirst Forest and European Residential 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 European Residential Real are associated (or correlated) with GreenFirst Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenFirst Forest has no effect on the direction of European Residential i.e., European Residential and GreenFirst Forest go up and down completely randomly.

Pair Corralation between European Residential and GreenFirst Forest

Assuming the 90 days trading horizon European Residential Real is expected to generate 1.34 times more return on investment than GreenFirst Forest. However, European Residential is 1.34 times more volatile than GreenFirst Forest Products. It trades about -0.09 of its potential returns per unit of risk. GreenFirst Forest Products is currently generating about -0.13 per unit of risk. If you would invest  381.00  in European Residential Real on December 26, 2024 and sell it today you would lose (123.00) from holding European Residential Real or give up 32.28% of portfolio value over 90 days.

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

European Residential Real  vs.  GreenFirst Forest Products

European Residential Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days European Residential Real 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 somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GreenFirst Forest

Risk-Adjusted Performance

Very Weak

Over the last 90 days GreenFirst Forest Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with European Residential and GreenFirst Forest

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

The idea behind European Residential Real and GreenFirst Forest Products 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.