Correlation Between Global Green and BA Airport

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

By analyzing existing cross correlation between Global Green Chemicals and BA Airport Leasehold, you can compare the effects of market volatilities on Global Green and BA Airport 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 Green with a short position of BA Airport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Green and BA Airport.

Diversification Opportunities for Global Green and BA Airport

0.23

Correlation Coefficient

Global Green  BA Airport

Modest diversification

The 3 months correlation between Global and BAREIT is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Global Green Chemicals and BA Airport Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BA Airport Leasehold and Global Green 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 Green Chemicals are associated (or correlated) with BA Airport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BA Airport Leasehold has no effect on the direction of Global Green i.e., Global Green and BA Airport go up and down completely randomly.

Pair Corralation between Global Green and BA Airport

Assuming the 90 days trading horizon Global Green Chemicals is expected to generate 4.2 times more return on investment than BA Airport. However, Global Green is 4.2 times more volatile than BA Airport Leasehold. It trades about 0.11 of its potential returns per unit of risk. BA Airport Leasehold is currently generating about 0.02 per unit of risk. If you would invest  409.00  in Global Green Chemicals on December 30, 2024 and sell it today you would earn a total of  87.00  from holding Global Green Chemicals or generate 21.27% return on investment over 90 days.

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

Global Green Chemicals  vs.  BA Airport Leasehold

Global Green Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Green Chemicals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Global Green disclosed solid returns over the last few months and may actually be approaching a breakup point.

BA Airport Leasehold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BA Airport Leasehold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BA Airport is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Green and BA Airport

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

The idea behind Global Green Chemicals and BA Airport Leasehold 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.