Correlation Between Greenhill and MBIA

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

By analyzing existing cross correlation between Greenhill Co and MBIA Inc, you can compare the effects of market volatilities on Greenhill and MBIA 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 Greenhill with a short position of MBIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Greenhill and MBIA.

Diversification Opportunities for Greenhill and MBIA

0.95

Correlation Coefficient

Greenhill  MBIA

Almost no diversification

The 3 months correlation between Greenhill and MBIA is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Greenhill Co and MBIA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBIA Inc and Greenhill 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 Greenhill Co are associated (or correlated) with MBIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBIA Inc has no effect on the direction of Greenhill i.e., Greenhill and MBIA go up and down completely randomly.

Pair Corralation between Greenhill and MBIA

Considering the 90-day investment horizon Greenhill Co is expected to generate 2.25 times more return on investment than MBIA. However, Greenhill is 2.25 times more volatile than MBIA Inc. It trades about 0.04 of its potential returns per unit of risk. MBIA Inc is currently generating about 0.02 per unit of risk. If you would invest  1,322  in Greenhill Co on October 21, 2024 and sell it today you would earn a total of  151.00  from holding Greenhill Co or generate 11.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	24.6%
Values	Daily Returns

Greenhill Co  vs.  MBIA Inc

Greenhill

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greenhill Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Greenhill is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

MBIA Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MBIA Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental drivers, MBIA demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Greenhill and MBIA

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

The idea behind Greenhill Co and MBIA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.