Correlation Between GRIN and ABL
Can any of the company-specific risk be diversified away by investing in both GRIN and ABL 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 GRIN and ABL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GRIN and ABL, you can compare the effects of market volatilities on GRIN and ABL 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 GRIN with a short position of ABL. Check out your portfolio center. Please also check ongoing floating volatility patterns of GRIN and ABL.
Diversification Opportunities for GRIN and ABL
Average diversification
The 3 months correlation between GRIN and ABL is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding GRIN and ABL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABL and GRIN 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 GRIN are associated (or correlated) with ABL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABL has no effect on the direction of GRIN i.e., GRIN and ABL go up and down completely randomly.
Pair Corralation between GRIN and ABL
Assuming the 90 days trading horizon GRIN is expected to generate 5.32 times less return on investment than ABL. In addition to that, GRIN is 1.79 times more volatile than ABL. It trades about 0.01 of its total potential returns per unit of risk. ABL is currently generating about 0.13 per unit of volatility. If you would invest 0.90 in ABL on August 23, 2024 and sell it today you would earn a total of 0.68 from holding ABL or generate 76.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 55.85% |
| Values | Daily Returns |
GRIN vs. ABL
Performance |
| Timeline |
| GRIN |
| ABL |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GRIN and ABL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GRIN and ABL
The main advantage of trading using opposite GRIN and ABL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GRIN position performs unexpectedly, ABL 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 ABL will offset losses from the drop in ABL's long position.The idea behind GRIN and ABL 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.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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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