Correlation Between Turning Point and Green Cures

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

By analyzing existing cross correlation between Turning Point Brands and Green Cures Botanical, you can compare the effects of market volatilities on Turning Point and Green Cures 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 Turning Point with a short position of Green Cures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Turning Point and Green Cures.

Diversification Opportunities for Turning Point and Green Cures

0.08

Correlation Coefficient

Turning Point  Green Cures

Significant diversification

The 3 months correlation between Turning and Green is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Turning Point Brands and Green Cures Botanical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cures Botanical and Turning Point 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 Turning Point Brands are associated (or correlated) with Green Cures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cures Botanical has no effect on the direction of Turning Point i.e., Turning Point and Green Cures go up and down completely randomly.

Pair Corralation between Turning Point and Green Cures

Considering the 90-day investment horizon Turning Point is expected to generate 23.25 times less return on investment than Green Cures. But when comparing it to its historical volatility, Turning Point Brands is 25.29 times less risky than Green Cures. It trades about 0.26 of its potential returns per unit of risk. Green Cures Botanical is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Green Cures Botanical on September 25, 2024 and sell it today you would earn a total of  0.01  from holding Green Cures Botanical or generate 100.0% return on investment over 90 days.

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

Turning Point Brands  vs.  Green Cures Botanical

Turning Point Brands

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Turning Point Brands are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Turning Point sustained solid returns over the last few months and may actually be approaching a breakup point.

Green Cures Botanical

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cures Botanical are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental indicators, Green Cures unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Turning Point and Green Cures

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

The idea behind Turning Point Brands and Green Cures Botanical 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.