Correlation Between SW Seed and Global Clean

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

By analyzing existing cross correlation between SW Seed Company and Global Clean Energy, you can compare the effects of market volatilities on SW Seed and Global Clean 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 SW Seed with a short position of Global Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of SW Seed and Global Clean.

Diversification Opportunities for SW Seed and Global Clean

-0.23

Correlation Coefficient

SW Seed  Global Clean

Very good diversification

The 3 months correlation between SANW and Global is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding SW Seed Company and Global Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Clean Energy and SW Seed 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 SW Seed Company are associated (or correlated) with Global Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Clean Energy has no effect on the direction of SW Seed i.e., SW Seed and Global Clean go up and down completely randomly.

Pair Corralation between SW Seed and Global Clean

Given the investment horizon of 90 days SW Seed is expected to generate 2.14 times less return on investment than Global Clean. But when comparing it to its historical volatility, SW Seed Company is 1.04 times less risky than Global Clean. It trades about 0.09 of its potential returns per unit of risk. Global Clean Energy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Global Clean Energy on September 3, 2024 and sell it today you would earn a total of  63.00  from holding Global Clean Energy or generate 175.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

SW Seed Company  vs.  Global Clean Energy

SW Seed Company

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SW Seed Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SW Seed showed solid returns over the last few months and may actually be approaching a breakup point.

Global Clean Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Clean Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting technical and fundamental indicators, Global Clean demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SW Seed and Global Clean

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

The idea behind SW Seed Company and Global Clean 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.