Correlation Between Zurn Elkay and Greenlane Renewables

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

By analyzing existing cross correlation between Zurn Elkay Water and Greenlane Renewables, you can compare the effects of market volatilities on Zurn Elkay and Greenlane Renewables 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 Zurn Elkay with a short position of Greenlane Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zurn Elkay and Greenlane Renewables.

Diversification Opportunities for Zurn Elkay and Greenlane Renewables

0.69

Correlation Coefficient

Zurn Elkay  Greenlane Renewables

Poor diversification

The 3 months correlation between Zurn and Greenlane is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Zurn Elkay Water and Greenlane Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenlane Renewables and Zurn Elkay 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 Zurn Elkay Water are associated (or correlated) with Greenlane Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenlane Renewables has no effect on the direction of Zurn Elkay i.e., Zurn Elkay and Greenlane Renewables go up and down completely randomly.

Pair Corralation between Zurn Elkay and Greenlane Renewables

Considering the 90-day investment horizon Zurn Elkay Water is expected to under-perform the Greenlane Renewables. But the stock apears to be less risky and, when comparing its historical volatility, Zurn Elkay Water is 3.95 times less risky than Greenlane Renewables. The stock trades about -0.12 of its potential returns per unit of risk. The Greenlane Renewables is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Greenlane Renewables on December 22, 2024 and sell it today you would earn a total of  0.28  from holding Greenlane Renewables or generate 4.31% return on investment over 90 days.

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

Zurn Elkay Water  vs.  Greenlane Renewables

Zurn Elkay Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zurn Elkay Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Greenlane Renewables

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Greenlane Renewables are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Greenlane Renewables reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zurn Elkay and Greenlane Renewables

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

The idea behind Zurn Elkay Water and Greenlane Renewables 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.