Correlation Between GREENLIGHT CAP and ResMed

Can any of the company-specific risk be diversified away by investing in both GREENLIGHT CAP and ResMed 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 ResMed 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 ResMed Inc, you can compare the effects of market volatilities on GREENLIGHT CAP and ResMed 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 ResMed. Check out your portfolio center. Please also check ongoing floating volatility patterns of GREENLIGHT CAP and ResMed.

Diversification Opportunities for GREENLIGHT CAP and ResMed

0.75

Correlation Coefficient

GREENLIGHT CAP  ResMed

Poor diversification

The 3 months correlation between GREENLIGHT and ResMed is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GREENLIGHT CAP RE and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of GREENLIGHT CAP i.e., GREENLIGHT CAP and ResMed go up and down completely randomly.

Pair Corralation between GREENLIGHT CAP and ResMed

Assuming the 90 days trading horizon GREENLIGHT CAP is expected to generate 1.99 times less return on investment than ResMed. But when comparing it to its historical volatility, GREENLIGHT CAP RE is 1.38 times less risky than ResMed. It trades about 0.06 of its potential returns per unit of risk. ResMed Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,845  in ResMed Inc on September 24, 2024 and sell it today you would earn a total of  9,375  from holding ResMed Inc or generate 72.99% return on investment over 90 days.

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

GREENLIGHT CAP RE  vs.  ResMed Inc

GREENLIGHT CAP RE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GREENLIGHT CAP RE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, GREENLIGHT CAP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ResMed Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ResMed is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GREENLIGHT CAP and ResMed

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

The idea behind GREENLIGHT CAP RE and ResMed Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.