Correlation Between North American and Guru Organic

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

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

Diversification Opportunities for North American and Guru Organic

-0.54

Correlation Coefficient

North American  Guru Organic

Excellent diversification

The 3 months correlation between North and Guru is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Guru Organic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guru Organic Energy and North American 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 North American Construction are associated (or correlated) with Guru Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guru Organic Energy has no effect on the direction of North American i.e., North American and Guru Organic go up and down completely randomly.

Pair Corralation between North American and Guru Organic

Assuming the 90 days trading horizon North American Construction is expected to generate 0.63 times more return on investment than Guru Organic. However, North American Construction is 1.59 times less risky than Guru Organic. It trades about 0.14 of its potential returns per unit of risk. Guru Organic Energy is currently generating about -0.1 per unit of risk. If you would invest  2,396  in North American Construction on October 15, 2024 and sell it today you would earn a total of  529.00  from holding North American Construction or generate 22.08% return on investment over 90 days.

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

North American Construction  vs.  Guru Organic Energy

North American Const

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, North American displayed solid returns over the last few months and may actually be approaching a breakup point.

Guru Organic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guru Organic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with North American and Guru Organic

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

The idea behind North American Construction and Guru Organic Energy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.