Correlation Between Green Cross and DIO

Can any of the company-specific risk be diversified away by investing in both Green Cross and DIO 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 Cross and DIO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Green Cross Medical and DIO Corporation, you can compare the effects of market volatilities on Green Cross and DIO 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 Cross with a short position of DIO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Cross and DIO.

Diversification Opportunities for Green Cross and DIO

0.11

Correlation Coefficient

Green Cross  DIO

Average diversification

The 3 months correlation between Green and DIO is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Green Cross Medical and DIO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIO Corporation and Green Cross 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 Cross Medical are associated (or correlated) with DIO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIO Corporation has no effect on the direction of Green Cross i.e., Green Cross and DIO go up and down completely randomly.

Pair Corralation between Green Cross and DIO

Assuming the 90 days trading horizon Green Cross Medical is expected to under-perform the DIO. In addition to that, Green Cross is 1.43 times more volatile than DIO Corporation. It trades about -0.08 of its total potential returns per unit of risk. DIO Corporation is currently generating about 0.0 per unit of volatility. If you would invest  1,637,000  in DIO Corporation on September 24, 2024 and sell it today you would lose (12,000) from holding DIO Corporation or give up 0.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Green Cross Medical  vs.  DIO Corp.

Green Cross Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Cross Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DIO Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DIO Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DIO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Green Cross and DIO

The main advantage of trading using opposite Green Cross and DIO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green Cross position performs unexpectedly, DIO 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 DIO will offset losses from the drop in DIO's long position.

The idea behind Green Cross Medical and DIO Corporation 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.