Correlation Between Now Corp and Green Cures
Can any of the company-specific risk be diversified away by investing in both Now Corp and Green Cures 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 Now Corp and Green Cures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Now Corp and Green Cures Botanical, you can compare the effects of market volatilities on Now Corp and Green Cures 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 Now Corp with a short position of Green Cures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now Corp and Green Cures.
Diversification Opportunities for Now Corp and Green Cures
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Now and Green is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Now Corp and Green Cures Botanical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cures Botanical and Now Corp 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 Now Corp are associated (or correlated) with Green Cures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cures Botanical has no effect on the direction of Now Corp i.e., Now Corp and Green Cures go up and down completely randomly.
Pair Corralation between Now Corp and Green Cures
Given the investment horizon of 90 days Now Corp is expected to generate 5.45 times more return on investment than Green Cures. However, Now Corp is 5.45 times more volatile than Green Cures Botanical. It trades about 0.28 of its potential returns per unit of risk. Green Cures Botanical is currently generating about 0.17 per unit of risk. If you would invest 0.02 in Now Corp on August 28, 2024 and sell it today you would lose (0.01) from holding Now Corp or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Now Corp vs. Green Cures Botanical
Performance |
| Timeline |
| Now Corp |
| Green Cures Botanical |
Now Corp and Green Cures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Now Corp and Green Cures
The main advantage of trading using opposite Now Corp and Green Cures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now Corp position performs unexpectedly, Green Cures 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 Cures will offset losses from the drop in Green Cures' long position.The idea behind Now Corp and Green Cures Botanical 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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