Correlation Between Guru Organic and Primaris Retail

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

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

Diversification Opportunities for Guru Organic and Primaris Retail

0.03

Correlation Coefficient

Guru Organic  Primaris Retail

Significant diversification

The 3 months correlation between Guru and Primaris is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Guru Organic Energy and Primaris Retail RE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primaris Retail RE and Guru Organic 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 Guru Organic Energy are associated (or correlated) with Primaris Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primaris Retail RE has no effect on the direction of Guru Organic i.e., Guru Organic and Primaris Retail go up and down completely randomly.

Pair Corralation between Guru Organic and Primaris Retail

Assuming the 90 days trading horizon Guru Organic Energy is expected to generate 3.55 times more return on investment than Primaris Retail. However, Guru Organic is 3.55 times more volatile than Primaris Retail RE. It trades about 0.12 of its potential returns per unit of risk. Primaris Retail RE is currently generating about -0.03 per unit of risk. If you would invest  137.00  in Guru Organic Energy on December 28, 2024 and sell it today you would earn a total of  44.00  from holding Guru Organic Energy or generate 32.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Guru Organic Energy  vs.  Primaris Retail RE

Guru Organic Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guru Organic Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Guru Organic displayed solid returns over the last few months and may actually be approaching a breakup point.

Primaris Retail RE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Primaris Retail RE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Primaris Retail is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guru Organic and Primaris Retail

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

The idea behind Guru Organic Energy and Primaris Retail RE 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.