Correlation Between Grand River and Woodlands Financial

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

By analyzing existing cross correlation between Grand River Commerce and Woodlands Financial Services, you can compare the effects of market volatilities on Grand River and Woodlands Financial 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 Grand River with a short position of Woodlands Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand River and Woodlands Financial.

Diversification Opportunities for Grand River and Woodlands Financial

0.75

Correlation Coefficient

Grand River  Woodlands Financial

Poor diversification

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

Pair Corralation between Grand River and Woodlands Financial

Given the investment horizon of 90 days Grand River Commerce is expected to generate 0.68 times more return on investment than Woodlands Financial. However, Grand River Commerce is 1.47 times less risky than Woodlands Financial. It trades about 0.29 of its potential returns per unit of risk. Woodlands Financial Services is currently generating about 0.12 per unit of risk. If you would invest  294.00  in Grand River Commerce on December 29, 2024 and sell it today you would earn a total of  106.00  from holding Grand River Commerce or generate 36.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.8%
Values	Daily Returns

Grand River Commerce  vs.  Woodlands Financial Services

Grand River Commerce

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grand River Commerce are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Grand River showed solid returns over the last few months and may actually be approaching a breakup point.

Woodlands Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Woodlands Financial Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Woodlands Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grand River and Woodlands Financial

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

The idea behind Grand River Commerce and Woodlands Financial Services 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.