Correlation Between Green River and Card Factory
Can any of the company-specific risk be diversified away by investing in both Green River and Card Factory 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 Green River and Card Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Green River Gold and Card Factory plc, you can compare the effects of market volatilities on Green River and Card Factory 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 Green River with a short position of Card Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green River and Card Factory.
Diversification Opportunities for Green River and Card Factory
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Green and Card is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Green River Gold and Card Factory plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Card Factory plc and Green River 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 Green River Gold are associated (or correlated) with Card Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Card Factory plc has no effect on the direction of Green River i.e., Green River and Card Factory go up and down completely randomly.
Pair Corralation between Green River and Card Factory
Assuming the 90 days horizon Green River is expected to generate 3.44 times less return on investment than Card Factory. But when comparing it to its historical volatility, Green River Gold is 2.53 times less risky than Card Factory. It trades about 0.03 of its potential returns per unit of risk. Card Factory plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2.01 in Card Factory plc on August 27, 2024 and sell it today you would earn a total of 115.99 from holding Card Factory plc or generate 5770.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Green River Gold vs. Card Factory plc
Performance |
| Timeline |
| Green River Gold |
| Card Factory plc |
Green River and Card Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Green River and Card Factory
The main advantage of trading using opposite Green River and Card Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green River position performs unexpectedly, Card Factory 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 Card Factory will offset losses from the drop in Card Factory's long position.| Green River vs. Burlington Stores | Green River vs. Childrens Place | Green River vs. Buckle Inc | Green River vs. Shoe Carnival |
| Card Factory vs. Dixons Carphone plc | Card Factory vs. Ceconomy AG ADR | Card Factory vs. Tandy Leather Factory | Card Factory vs. Green River Gold |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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