Correlation Between American Green and StateHouse Holdings

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

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

Diversification Opportunities for American Green and StateHouse Holdings

0.05

Correlation Coefficient

American Green  StateHouse Holdings

Significant diversification

The 3 months correlation between American and StateHouse is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding American Green and StateHouse Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StateHouse Holdings and American Green 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 American Green are associated (or correlated) with StateHouse Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StateHouse Holdings has no effect on the direction of American Green i.e., American Green and StateHouse Holdings go up and down completely randomly.

Pair Corralation between American Green and StateHouse Holdings

Given the investment horizon of 90 days American Green is expected to generate 2.39 times more return on investment than StateHouse Holdings. However, American Green is 2.39 times more volatile than StateHouse Holdings. It trades about 0.12 of its potential returns per unit of risk. StateHouse Holdings is currently generating about -0.06 per unit of risk. If you would invest  0.04  in American Green on September 20, 2024 and sell it today you would earn a total of  0.02  from holding American Green or generate 50.0% return on investment over 90 days.

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

American Green  vs.  StateHouse Holdings

American Green

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Green are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, American Green sustained solid returns over the last few months and may actually be approaching a breakup point.

StateHouse Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StateHouse Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with American Green and StateHouse Holdings

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

The idea behind American Green and StateHouse Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.