Correlation Between Great Portland and CREMECOMTRSBI

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

By analyzing existing cross correlation between Great Portland Estates and CREMECOMTRSBI DL 001, you can compare the effects of market volatilities on Great Portland and CREMECOMTRSBI 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 Great Portland with a short position of CREMECOMTRSBI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Portland and CREMECOMTRSBI.

Diversification Opportunities for Great Portland and CREMECOMTRSBI

0.77

Correlation Coefficient

Great Portland  CREMECOMTRSBI

Poor diversification

The 3 months correlation between Great and CREMECOMTRSBI is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Great Portland Estates and CREMECOMTRSBI DL 001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CREMECOMTRSBI DL 001 and Great Portland 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 Great Portland Estates are associated (or correlated) with CREMECOMTRSBI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CREMECOMTRSBI DL 001 has no effect on the direction of Great Portland i.e., Great Portland and CREMECOMTRSBI go up and down completely randomly.

Pair Corralation between Great Portland and CREMECOMTRSBI

Assuming the 90 days trading horizon Great Portland Estates is expected to under-perform the CREMECOMTRSBI. But the stock apears to be less risky and, when comparing its historical volatility, Great Portland Estates is 37.53 times less risky than CREMECOMTRSBI. The stock trades about -0.2 of its potential returns per unit of risk. The CREMECOMTRSBI DL 001 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  43.00  in CREMECOMTRSBI DL 001 on September 28, 2024 and sell it today you would lose (31.00) from holding CREMECOMTRSBI DL 001 or give up 72.09% of portfolio value over 90 days.

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

Great Portland Estates  vs.  CREMECOMTRSBI DL 001

Great Portland Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Portland Estates 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 forward-looking signals 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.

CREMECOMTRSBI DL 001

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CREMECOMTRSBI DL 001 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CREMECOMTRSBI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Portland and CREMECOMTRSBI

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

The idea behind Great Portland Estates and CREMECOMTRSBI DL 001 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.