Correlation Between Carters and Green Brick

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

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

Diversification Opportunities for Carters and Green Brick

0.56

Correlation Coefficient

Carters  Green Brick

Very weak diversification

The 3 months correlation between Carters and Green is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Green Brick Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Brick Partners and Carters 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 Carters are associated (or correlated) with Green Brick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Brick Partners has no effect on the direction of Carters i.e., Carters and Green Brick go up and down completely randomly.

Pair Corralation between Carters and Green Brick

Considering the 90-day investment horizon Carters is expected to generate 1.05 times more return on investment than Green Brick. However, Carters is 1.05 times more volatile than Green Brick Partners. It trades about -0.1 of its potential returns per unit of risk. Green Brick Partners is currently generating about -0.21 per unit of risk. If you would invest  6,534  in Carters on September 22, 2024 and sell it today you would lose (1,072) from holding Carters or give up 16.41% of portfolio value over 90 days.

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

Carters  vs.  Green Brick Partners

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Green Brick Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Brick Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Carters and Green Brick

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

The idea behind Carters and Green Brick Partners 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.