Correlation Between Gevo and WESTERN NEW

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

By analyzing existing cross correlation between Gevo Inc and WESTERN NEW ENGL, you can compare the effects of market volatilities on Gevo and WESTERN NEW 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 Gevo with a short position of WESTERN NEW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gevo and WESTERN NEW.

Diversification Opportunities for Gevo and WESTERN NEW

-0.22

Correlation Coefficient

Gevo  WESTERN NEW

Very good diversification

The 3 months correlation between Gevo and WESTERN is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Gevo Inc and WESTERN NEW ENGL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN NEW ENGL and Gevo 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 Gevo Inc are associated (or correlated) with WESTERN NEW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN NEW ENGL has no effect on the direction of Gevo i.e., Gevo and WESTERN NEW go up and down completely randomly.

Pair Corralation between Gevo and WESTERN NEW

Assuming the 90 days trading horizon Gevo Inc is expected to generate 5.36 times more return on investment than WESTERN NEW. However, Gevo is 5.36 times more volatile than WESTERN NEW ENGL. It trades about 0.0 of its potential returns per unit of risk. WESTERN NEW ENGL is currently generating about -0.05 per unit of risk. If you would invest  144.00  in Gevo Inc on December 21, 2024 and sell it today you would lose (25.00) from holding Gevo Inc or give up 17.36% of portfolio value over 90 days.

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

Gevo Inc  vs.  WESTERN NEW ENGL

Gevo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gevo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gevo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WESTERN NEW ENGL

Risk-Adjusted Performance

Very Weak

Over the last 90 days WESTERN NEW ENGL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WESTERN NEW is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gevo and WESTERN NEW

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

The idea behind Gevo Inc and WESTERN NEW ENGL 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.