Correlation Between Greif Bros and Alliance Creative

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

By analyzing existing cross correlation between Greif Bros and Alliance Creative Gr, you can compare the effects of market volatilities on Greif Bros and Alliance Creative 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 Greif Bros with a short position of Alliance Creative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Greif Bros and Alliance Creative.

Diversification Opportunities for Greif Bros and Alliance Creative

0.04

Correlation Coefficient

Greif Bros  Alliance Creative

Significant diversification

The 3 months correlation between Greif and Alliance is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Greif Bros and Alliance Creative Gr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Creative and Greif Bros 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 Greif Bros are associated (or correlated) with Alliance Creative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Creative has no effect on the direction of Greif Bros i.e., Greif Bros and Alliance Creative go up and down completely randomly.

Pair Corralation between Greif Bros and Alliance Creative

Considering the 90-day investment horizon Greif Bros is expected to generate 0.09 times more return on investment than Alliance Creative. However, Greif Bros is 11.42 times less risky than Alliance Creative. It trades about -0.65 of its potential returns per unit of risk. Alliance Creative Gr is currently generating about -0.07 per unit of risk. If you would invest  7,157  in Greif Bros on September 25, 2024 and sell it today you would lose (1,125) from holding Greif Bros or give up 15.72% of portfolio value over 90 days.

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

Greif Bros  vs.  Alliance Creative Gr

Greif Bros

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alliance Creative

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Creative Gr are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, Alliance Creative showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Greif Bros and Alliance Creative

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

The idea behind Greif Bros and Alliance Creative Gr 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.