Correlation Between Global Clean and Village Farms

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

By analyzing existing cross correlation between Global Clean Energy and Village Farms International, you can compare the effects of market volatilities on Global Clean and Village Farms 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 Global Clean with a short position of Village Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Clean and Village Farms.

Diversification Opportunities for Global Clean and Village Farms

0.45

Correlation Coefficient

Global Clean  Village Farms

Very weak diversification

The 3 months correlation between Global and Village is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Global Clean Energy and Village Farms International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Farms Intern and Global Clean 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 Global Clean Energy are associated (or correlated) with Village Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Farms Intern has no effect on the direction of Global Clean i.e., Global Clean and Village Farms go up and down completely randomly.

Pair Corralation between Global Clean and Village Farms

Given the investment horizon of 90 days Global Clean Energy is expected to generate 4.37 times more return on investment than Village Farms. However, Global Clean is 4.37 times more volatile than Village Farms International. It trades about 0.04 of its potential returns per unit of risk. Village Farms International is currently generating about 0.0 per unit of risk. If you would invest  95.00  in Global Clean Energy on December 19, 2024 and sell it today you would lose (20.00) from holding Global Clean Energy or give up 21.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Global Clean Energy  vs.  Village Farms International

Global Clean Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Clean Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting technical and fundamental indicators, Global Clean demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Village Farms Intern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Village Farms International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Village Farms is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Global Clean and Village Farms

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

The idea behind Global Clean Energy and Village Farms International 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.