Correlation Between Greenlane Renewables and China Natural

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

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

Diversification Opportunities for Greenlane Renewables and China Natural

-0.53

Correlation Coefficient

Greenlane Renewables  China Natural

Excellent diversification

The 3 months correlation between Greenlane and China is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Greenlane Renewables and China Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Natural Resources and Greenlane Renewables 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 Greenlane Renewables are associated (or correlated) with China Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Natural Resources has no effect on the direction of Greenlane Renewables i.e., Greenlane Renewables and China Natural go up and down completely randomly.

Pair Corralation between Greenlane Renewables and China Natural

Assuming the 90 days horizon Greenlane Renewables is expected to generate 1.24 times more return on investment than China Natural. However, Greenlane Renewables is 1.24 times more volatile than China Natural Resources. It trades about 0.12 of its potential returns per unit of risk. China Natural Resources is currently generating about 0.01 per unit of risk. If you would invest  5.00  in Greenlane Renewables on September 15, 2024 and sell it today you would earn a total of  3.10  from holding Greenlane Renewables or generate 62.0% return on investment over 90 days.

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

Greenlane Renewables  vs.  China Natural Resources

Greenlane Renewables

Risk-Adjusted Performance

9 of 100

OK

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

China Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, China Natural is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Greenlane Renewables and China Natural

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

The idea behind Greenlane Renewables and China Natural Resources 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.