Correlation Between ECD Automotive and GreenPower

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

By analyzing existing cross correlation between ECD Automotive Design and GreenPower Motor, you can compare the effects of market volatilities on ECD Automotive and GreenPower 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 ECD Automotive with a short position of GreenPower. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECD Automotive and GreenPower.

Diversification Opportunities for ECD Automotive and GreenPower

0.53

Correlation Coefficient

ECD Automotive  GreenPower

Very weak diversification

The 3 months correlation between ECD and GreenPower is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor and ECD Automotive 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 ECD Automotive Design are associated (or correlated) with GreenPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPower Motor has no effect on the direction of ECD Automotive i.e., ECD Automotive and GreenPower go up and down completely randomly.

Pair Corralation between ECD Automotive and GreenPower

Given the investment horizon of 90 days ECD Automotive Design is expected to under-perform the GreenPower. But the stock apears to be less risky and, when comparing its historical volatility, ECD Automotive Design is 2.1 times less risky than GreenPower. The stock trades about -0.04 of its potential returns per unit of risk. The GreenPower Motor is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  91.00  in GreenPower Motor on September 3, 2024 and sell it today you would earn a total of  8.00  from holding GreenPower Motor or generate 8.79% return on investment over 90 days.

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

ECD Automotive Design  vs.  GreenPower Motor

ECD Automotive Design

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

GreenPower Motor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GreenPower Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, GreenPower reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECD Automotive and GreenPower

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

The idea behind ECD Automotive Design and GreenPower Motor 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.