Correlation Between Greenlight Capital and Everest

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

By analyzing existing cross correlation between Greenlight Capital Re and Everest Group, you can compare the effects of market volatilities on Greenlight Capital and Everest 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 Greenlight Capital with a short position of Everest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Greenlight Capital and Everest.

Diversification Opportunities for Greenlight Capital and Everest

-0.21

Correlation Coefficient

Greenlight Capital  Everest

Very good diversification

The 3 months correlation between Greenlight and Everest is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Greenlight Capital Re and Everest Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everest Group and Greenlight Capital 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 Greenlight Capital Re are associated (or correlated) with Everest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everest Group has no effect on the direction of Greenlight Capital i.e., Greenlight Capital and Everest go up and down completely randomly.

Pair Corralation between Greenlight Capital and Everest

Given the investment horizon of 90 days Greenlight Capital Re is expected to generate 0.92 times more return on investment than Everest. However, Greenlight Capital Re is 1.08 times less risky than Everest. It trades about 0.0 of its potential returns per unit of risk. Everest Group is currently generating about -0.05 per unit of risk. If you would invest  1,396  in Greenlight Capital Re on September 24, 2024 and sell it today you would lose (6.00) from holding Greenlight Capital Re or give up 0.43% of portfolio value over 90 days.

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

Greenlight Capital Re  vs.  Everest Group

Greenlight Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greenlight Capital Re has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Greenlight Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Everest Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everest Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Everest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Greenlight Capital and Everest

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

The idea behind Greenlight Capital Re and Everest Group 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .