Correlation Between Nouveau Life and Green Planet

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

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

Diversification Opportunities for Nouveau Life and Green Planet

0.04

Correlation Coefficient

Nouveau Life  Green Planet

Significant diversification

The 3 months correlation between Nouveau and Green is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nouveau Life Pharmaceuticals and Green Planet Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Planet Bio and Nouveau Life 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 Nouveau Life Pharmaceuticals are associated (or correlated) with Green Planet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Planet Bio has no effect on the direction of Nouveau Life i.e., Nouveau Life and Green Planet go up and down completely randomly.

Pair Corralation between Nouveau Life and Green Planet

Given the investment horizon of 90 days Nouveau Life Pharmaceuticals is expected to generate 2.47 times more return on investment than Green Planet. However, Nouveau Life is 2.47 times more volatile than Green Planet Bio. It trades about 0.1 of its potential returns per unit of risk. Green Planet Bio is currently generating about -0.15 per unit of risk. If you would invest  0.02  in Nouveau Life Pharmaceuticals on December 3, 2024 and sell it today you would lose (0.01) from holding Nouveau Life Pharmaceuticals or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Nouveau Life Pharmaceuticals  vs.  Green Planet Bio

Nouveau Life Pharmac

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nouveau Life Pharmaceuticals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nouveau Life showed solid returns over the last few months and may actually be approaching a breakup point.

Green Planet Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Green Planet Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nouveau Life and Green Planet

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

The idea behind Nouveau Life Pharmaceuticals and Green Planet Bio 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.