Correlation Between Green Cures and For Earth

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

By analyzing existing cross correlation between Green Cures Botanical and For The Earth, you can compare the effects of market volatilities on Green Cures and For Earth 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 Green Cures with a short position of For Earth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Cures and For Earth.

Diversification Opportunities for Green Cures and For Earth

-0.15

Correlation Coefficient

Green Cures  For Earth

Good diversification

The 3 months correlation between Green and For is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Green Cures Botanical and For The Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on For The Earth and Green Cures 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 Green Cures Botanical are associated (or correlated) with For Earth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of For The Earth has no effect on the direction of Green Cures i.e., Green Cures and For Earth go up and down completely randomly.

Pair Corralation between Green Cures and For Earth

Given the investment horizon of 90 days Green Cures is expected to generate 1.5 times less return on investment than For Earth. But when comparing it to its historical volatility, Green Cures Botanical is 2.5 times less risky than For Earth. It trades about 0.19 of its potential returns per unit of risk. For The Earth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.01  in For The Earth on October 8, 2024 and sell it today you would earn a total of  0.00  from holding For The Earth or generate 0.0% return on investment over 90 days.

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

Green Cures Botanical  vs.  For The Earth

Green Cures Botanical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cures Botanical are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Green Cures unveiled solid returns over the last few months and may actually be approaching a breakup point.

For The Earth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in For The Earth are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, For Earth reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Green Cures and For Earth

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

The idea behind Green Cures Botanical and For The Earth 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 Anywhere module to track or share privately all of your investments from the convenience of any device.