Correlation Between Green Leaf and Plandai Biotech

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

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

Diversification Opportunities for Green Leaf and Plandai Biotech

0.16

Correlation Coefficient

Green Leaf  Plandai Biotech

Average diversification

The 3 months correlation between Green and Plandai is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Green Leaf Innovations and Plandai Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plandai Biotech and Green Leaf 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 Leaf Innovations are associated (or correlated) with Plandai Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plandai Biotech has no effect on the direction of Green Leaf i.e., Green Leaf and Plandai Biotech go up and down completely randomly.

Pair Corralation between Green Leaf and Plandai Biotech

Given the investment horizon of 90 days Green Leaf is expected to generate 3.52 times less return on investment than Plandai Biotech. But when comparing it to its historical volatility, Green Leaf Innovations is 2.1 times less risky than Plandai Biotech. It trades about 0.15 of its potential returns per unit of risk. Plandai Biotech is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Plandai Biotech on December 28, 2024 and sell it today you would lose (0.01) from holding Plandai Biotech or give up 100.0% of portfolio value over 90 days.

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

Green Leaf Innovations  vs.  Plandai Biotech

Green Leaf Innovations

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Green Leaf Innovations are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, Green Leaf reported solid returns over the last few months and may actually be approaching a breakup point.

Plandai Biotech

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plandai Biotech are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Plandai Biotech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Green Leaf and Plandai Biotech

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

The idea behind Green Leaf Innovations and Plandai Biotech 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.