Correlation Between Woodlands Financial and Grand River
Can any of the company-specific risk be diversified away by investing in both Woodlands Financial and Grand River 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 Woodlands Financial and Grand River into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woodlands Financial Services and Grand River Commerce, you can compare the effects of market volatilities on Woodlands Financial and Grand River 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 Woodlands Financial with a short position of Grand River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woodlands Financial and Grand River.
Diversification Opportunities for Woodlands Financial and Grand River
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Woodlands and Grand is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Woodlands Financial Services and Grand River Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand River Commerce and Woodlands Financial 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 Woodlands Financial Services are associated (or correlated) with Grand River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand River Commerce has no effect on the direction of Woodlands Financial i.e., Woodlands Financial and Grand River go up and down completely randomly.
Pair Corralation between Woodlands Financial and Grand River
Given the investment horizon of 90 days Woodlands Financial Services is expected to under-perform the Grand River. But the pink sheet apears to be less risky and, when comparing its historical volatility, Woodlands Financial Services is 2.08 times less risky than Grand River. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Grand River Commerce is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 303.00 in Grand River Commerce on August 29, 2024 and sell it today you would earn a total of 2.00 from holding Grand River Commerce or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woodlands Financial Services vs. Grand River Commerce
Performance |
| Timeline |
| Woodlands Financial |
| Grand River Commerce |
Woodlands Financial and Grand River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woodlands Financial and Grand River
The main advantage of trading using opposite Woodlands Financial and Grand River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodlands Financial position performs unexpectedly, Grand River 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 Grand River will offset losses from the drop in Grand River's long position.The idea behind Woodlands Financial Services and Grand River Commerce 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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