Correlation Between Green Cures and Vapor

Can any of the company-specific risk be diversified away by investing in both Green Cures and Vapor 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 Vapor 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 Vapor Group, you can compare the effects of market volatilities on Green Cures and Vapor 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 Vapor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Cures and Vapor.

Diversification Opportunities for Green Cures and Vapor

0.33

Correlation Coefficient

Green Cures  Vapor

Weak diversification

The 3 months correlation between Green and Vapor is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Green Cures Botanical and Vapor Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vapor Group 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 Vapor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vapor Group has no effect on the direction of Green Cures i.e., Green Cures and Vapor go up and down completely randomly.

Pair Corralation between Green Cures and Vapor

Given the investment horizon of 90 days Green Cures is expected to generate 1.66 times less return on investment than Vapor. But when comparing it to its historical volatility, Green Cures Botanical is 2.77 times less risky than Vapor. It trades about 0.19 of its potential returns per unit of risk. Vapor Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Vapor Group on December 27, 2024 and sell it today you would lose (0.01) from holding Vapor Group or give up 90.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Green Cures Botanical  vs.  Vapor Group

Green Cures Botanical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cures Botanical are ranked lower than 15 (%) 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.

Vapor Group

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vapor Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Vapor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Green Cures and Vapor

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

The idea behind Green Cures Botanical and Vapor Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.