Correlation Between Fobi AI and GreenPower

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

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

Diversification Opportunities for Fobi AI and GreenPower

0.69

Correlation Coefficient

Fobi AI  GreenPower

Poor diversification

The 3 months correlation between Fobi and GreenPower is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fobi AI and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor and Fobi AI 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 Fobi AI 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 Fobi AI i.e., Fobi AI and GreenPower go up and down completely randomly.

Pair Corralation between Fobi AI and GreenPower

Assuming the 90 days trading horizon Fobi AI is expected to under-perform the GreenPower. But the stock apears to be less risky and, when comparing its historical volatility, Fobi AI is 1.46 times less risky than GreenPower. The stock trades about -0.08 of its potential returns per unit of risk. The GreenPower Motor is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  129.00  in GreenPower Motor on September 9, 2024 and sell it today you would lose (1.00) from holding GreenPower Motor or give up 0.78% of portfolio value over 90 days.

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

Fobi AI  vs.  GreenPower Motor

Fobi AI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fobi AI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

GreenPower Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GreenPower Motor are ranked lower than 2 (%) 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 Fobi AI and GreenPower

The main advantage of trading using opposite Fobi AI and GreenPower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fobi AI 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 Fobi AI 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.