Correlation Between Tandy Leather and Green River

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

By analyzing existing cross correlation between Tandy Leather Factory and Green River Gold, you can compare the effects of market volatilities on Tandy Leather and Green River 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 Tandy Leather with a short position of Green River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tandy Leather and Green River.

Diversification Opportunities for Tandy Leather and Green River

0.64

Correlation Coefficient

Tandy Leather  Green River

Poor diversification

The 3 months correlation between Tandy and Green is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tandy Leather Factory and Green River Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green River Gold and Tandy Leather 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 Tandy Leather Factory are associated (or correlated) with Green River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green River Gold has no effect on the direction of Tandy Leather i.e., Tandy Leather and Green River go up and down completely randomly.

Pair Corralation between Tandy Leather and Green River

Considering the 90-day investment horizon Tandy Leather Factory is expected to under-perform the Green River. But the stock apears to be less risky and, when comparing its historical volatility, Tandy Leather Factory is 3.46 times less risky than Green River. The stock trades about -0.07 of its potential returns per unit of risk. The Green River Gold is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.58  in Green River Gold on December 28, 2024 and sell it today you would lose (0.08) from holding Green River Gold or give up 13.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Tandy Leather Factory  vs.  Green River Gold

Tandy Leather Factory

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tandy Leather Factory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Green River Gold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Green River Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Green River reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tandy Leather and Green River

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

The idea behind Tandy Leather Factory and Green River Gold 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.