Correlation Between Alimera Sciences and Green Thumb

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

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

Diversification Opportunities for Alimera Sciences and Green Thumb

0.24

Correlation Coefficient

Alimera Sciences  Green Thumb

Modest diversification

The 3 months correlation between Alimera and Green is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alimera Sciences and Green Thumb Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Thumb Industries and Alimera Sciences 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 Alimera Sciences are associated (or correlated) with Green Thumb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Thumb Industries has no effect on the direction of Alimera Sciences i.e., Alimera Sciences and Green Thumb go up and down completely randomly.

Pair Corralation between Alimera Sciences and Green Thumb

Given the investment horizon of 90 days Alimera Sciences is expected to generate 0.7 times more return on investment than Green Thumb. However, Alimera Sciences is 1.43 times less risky than Green Thumb. It trades about 0.03 of its potential returns per unit of risk. Green Thumb Industries is currently generating about 0.0 per unit of risk. If you would invest  552.00  in Alimera Sciences on September 1, 2024 and sell it today you would earn a total of  2.00  from holding Alimera Sciences or generate 0.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	15.87%
Values	Daily Returns

Alimera Sciences  vs.  Green Thumb Industries

Alimera Sciences

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Alimera Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Alimera Sciences is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Green Thumb Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Thumb Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Green Thumb is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alimera Sciences and Green Thumb

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

The idea behind Alimera Sciences and Green Thumb Industries 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.