Correlation Between GRIN and DATA

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

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

Diversification Opportunities for GRIN and DATA

0.44

Correlation Coefficient

GRIN  DATA

Very weak diversification

The 3 months correlation between GRIN and DATA is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding GRIN and DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATA and GRIN 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 GRIN are associated (or correlated) with DATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATA has no effect on the direction of GRIN i.e., GRIN and DATA go up and down completely randomly.

Pair Corralation between GRIN and DATA

Assuming the 90 days trading horizon GRIN is expected to generate 1.25 times less return on investment than DATA. But when comparing it to its historical volatility, GRIN is 1.08 times less risky than DATA. It trades about 0.09 of its potential returns per unit of risk. DATA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3.44  in DATA on August 30, 2024 and sell it today you would earn a total of  1.10  from holding DATA or generate 31.98% return on investment over 90 days.

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

GRIN  vs.  DATA

GRIN

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GRIN are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, GRIN exhibited solid returns over the last few months and may actually be approaching a breakup point.

DATA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, DATA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GRIN and DATA

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

The idea behind GRIN and DATA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.