Correlation Between Green Plus and EE-HWA Construction

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

By analyzing existing cross correlation between Green Plus Co and EE HWA Construction Co, you can compare the effects of market volatilities on Green Plus and EE-HWA Construction 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 Plus with a short position of EE-HWA Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Plus and EE-HWA Construction.

Diversification Opportunities for Green Plus and EE-HWA Construction

-0.11

Correlation Coefficient

Green Plus  EE-HWA Construction

Good diversification

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

Pair Corralation between Green Plus and EE-HWA Construction

Assuming the 90 days trading horizon Green Plus Co is expected to generate 0.75 times more return on investment than EE-HWA Construction. However, Green Plus Co is 1.34 times less risky than EE-HWA Construction. It trades about 0.01 of its potential returns per unit of risk. EE HWA Construction Co is currently generating about 0.0 per unit of risk. If you would invest  876,000  in Green Plus Co on September 12, 2024 and sell it today you would lose (44,000) from holding Green Plus Co or give up 5.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.69%
Values	Daily Returns

Green Plus Co  vs.  EE HWA Construction Co

Green Plus

Risk-Adjusted Performance

0 of 100

Very Weak

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

EE HWA Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EE HWA Construction Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EE-HWA Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Green Plus and EE-HWA Construction

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

The idea behind Green Plus Co and EE HWA Construction Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.