Correlation Between Regional Container and Global Green

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

By analyzing existing cross correlation between Regional Container Lines and Global Green Chemicals, you can compare the effects of market volatilities on Regional Container and Global Green 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 Regional Container with a short position of Global Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Container and Global Green.

Diversification Opportunities for Regional Container and Global Green

0.68

Correlation Coefficient

Regional Container  Global Green

Poor diversification

The 3 months correlation between Regional and Global is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines and Global Green Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Green Chemicals and Regional Container 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 Regional Container Lines are associated (or correlated) with Global Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Green Chemicals has no effect on the direction of Regional Container i.e., Regional Container and Global Green go up and down completely randomly.

Pair Corralation between Regional Container and Global Green

Assuming the 90 days trading horizon Regional Container Lines is expected to generate 78.82 times more return on investment than Global Green. However, Regional Container is 78.82 times more volatile than Global Green Chemicals. It trades about 0.12 of its potential returns per unit of risk. Global Green Chemicals is currently generating about -0.02 per unit of risk. If you would invest  2,408  in Regional Container Lines on September 5, 2024 and sell it today you would earn a total of  467.00  from holding Regional Container Lines or generate 19.39% return on investment over 90 days.

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

Regional Container Lines  vs.  Global Green Chemicals

Regional Container Lines

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Regional Container sustained solid returns over the last few months and may actually be approaching a breakup point.

Global Green Chemicals

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Global Green Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Global Green is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Regional Container and Global Green

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

The idea behind Regional Container Lines and Global Green Chemicals 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 Global Correlations module to find global opportunities by holding instruments from different markets.