Correlation Between New Generation and Green Planet
Can any of the company-specific risk be diversified away by investing in both New Generation and Green Planet 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 New Generation and Green Planet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Generation Consumer and Green Planet Bio, you can compare the effects of market volatilities on New Generation and Green Planet 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 New Generation with a short position of Green Planet. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Generation and Green Planet.
Diversification Opportunities for New Generation and Green Planet
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between New and Green is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding New Generation Consumer and Green Planet Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Planet Bio and New Generation 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 New Generation Consumer are associated (or correlated) with Green Planet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Planet Bio has no effect on the direction of New Generation i.e., New Generation and Green Planet go up and down completely randomly.
Pair Corralation between New Generation and Green Planet
Given the investment horizon of 90 days New Generation is expected to generate 22.11 times less return on investment than Green Planet. But when comparing it to its historical volatility, New Generation Consumer is 8.54 times less risky than Green Planet. It trades about 0.05 of its potential returns per unit of risk. Green Planet Bio is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 0.05 in Green Planet Bio on September 1, 2024 and sell it today you would earn a total of 53.95 from holding Green Planet Bio or generate 107900.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Generation Consumer vs. Green Planet Bio
Performance |
| Timeline |
| New Generation Consumer |
| Green Planet Bio |
New Generation and Green Planet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Generation and Green Planet
The main advantage of trading using opposite New Generation and Green Planet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Generation position performs unexpectedly, Green Planet 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 Planet will offset losses from the drop in Green Planet's long position.| New Generation vs. Xtra Energy Corp | New Generation vs. Arsenal Digital Holdings | New Generation vs. UHF Logistics Group | New Generation vs. XCana Petroleum |
| Green Planet vs. Niagara Mohawk Power | Green Planet vs. The Siam Cement | Green Planet vs. Oaktree Capital Group |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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