Correlation Between GREENLIGHT CAP and Imperial Brands
Can any of the company-specific risk be diversified away by investing in both GREENLIGHT CAP and Imperial Brands 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 GREENLIGHT CAP and Imperial Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GREENLIGHT CAP RE and Imperial Brands PLC, you can compare the effects of market volatilities on GREENLIGHT CAP and Imperial Brands 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 GREENLIGHT CAP with a short position of Imperial Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of GREENLIGHT CAP and Imperial Brands.
Diversification Opportunities for GREENLIGHT CAP and Imperial Brands
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GREENLIGHT and Imperial is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GREENLIGHT CAP RE and Imperial Brands PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Brands PLC and GREENLIGHT CAP 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 GREENLIGHT CAP RE are associated (or correlated) with Imperial Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Brands PLC has no effect on the direction of GREENLIGHT CAP i.e., GREENLIGHT CAP and Imperial Brands go up and down completely randomly.
Pair Corralation between GREENLIGHT CAP and Imperial Brands
Assuming the 90 days trading horizon GREENLIGHT CAP RE is expected to generate 1.47 times more return on investment than Imperial Brands. However, GREENLIGHT CAP is 1.47 times more volatile than Imperial Brands PLC. It trades about 0.07 of its potential returns per unit of risk. Imperial Brands PLC is currently generating about 0.07 per unit of risk. If you would invest 755.00 in GREENLIGHT CAP RE on September 23, 2024 and sell it today you would earn a total of 575.00 from holding GREENLIGHT CAP RE or generate 76.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
GREENLIGHT CAP RE vs. Imperial Brands PLC
Performance |
Timeline |
GREENLIGHT CAP RE |
Imperial Brands PLC |
GREENLIGHT CAP and Imperial Brands Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GREENLIGHT CAP and Imperial Brands
The main advantage of trading using opposite GREENLIGHT CAP and Imperial Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GREENLIGHT CAP position performs unexpectedly, Imperial Brands 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 Imperial Brands will offset losses from the drop in Imperial Brands' long position.GREENLIGHT CAP vs. SLR Investment Corp | GREENLIGHT CAP vs. X FAB Silicon Foundries | GREENLIGHT CAP vs. Strategic Investments AS | GREENLIGHT CAP vs. Shin Etsu Chemical Co |
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Check out your portfolio center.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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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