Correlation Between Solo Brands and Green Brick

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

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

Diversification Opportunities for Solo Brands and Green Brick

0.82

Correlation Coefficient

Solo Brands  Green Brick

Very poor diversification

The 3 months correlation between Solo and Green is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Solo Brands 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 Solo Brands 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 Solo Brands 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 Solo Brands i.e., Solo Brands and Green Brick go up and down completely randomly.

Pair Corralation between Solo Brands and Green Brick

Considering the 90-day investment horizon Solo Brands is expected to under-perform the Green Brick. In addition to that, Solo Brands is 1.91 times more volatile than Green Brick Partners. It trades about -0.02 of its total potential returns per unit of risk. Green Brick Partners is currently generating about 0.08 per unit of volatility. If you would invest  2,480  in Green Brick Partners on September 22, 2024 and sell it today you would earn a total of  3,283  from holding Green Brick Partners or generate 132.38% return on investment over 90 days.

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

Solo Brands  vs.  Green Brick Partners

Solo Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solo Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Solo Brands and Green Brick

The main advantage of trading using opposite Solo Brands and Green Brick positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solo Brands 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 Solo Brands 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.