Correlation Between Vapor and Green Cures

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

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

Diversification Opportunities for Vapor and Green Cures

0.33

Correlation Coefficient

Vapor  Green Cures

Weak diversification

The 3 months correlation between Vapor and Green is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vapor Group 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 Vapor 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 Vapor Group 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 Vapor i.e., Vapor and Green Cures go up and down completely randomly.

Pair Corralation between Vapor and Green Cures

Given the investment horizon of 90 days Vapor Group is expected to generate 2.77 times more return on investment than Green Cures. However, Vapor is 2.77 times more volatile than Green Cures Botanical. It trades about 0.12 of its potential returns per unit of risk. Green Cures Botanical is currently generating about 0.19 per unit of risk. If you would invest  0.01  in Vapor Group on December 27, 2024 and sell it today you would lose (0.01) from holding Vapor Group or give up 90.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Vapor Group  vs.  Green Cures Botanical

Vapor Group

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vapor Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Vapor reported solid returns over the last few months and may actually be approaching a breakup point.

Green Cures Botanical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cures Botanical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Green Cures unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vapor and Green Cures

The main advantage of trading using opposite Vapor and Green Cures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vapor 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 Vapor Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.