Correlation Between Goodtech and Waste Plastic

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

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

Diversification Opportunities for Goodtech and Waste Plastic

0.67

Correlation Coefficient

Goodtech  Waste Plastic

Poor diversification

The 3 months correlation between Goodtech and Waste is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Goodtech and Waste Plastic Upcycling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Plastic Upcycling and Goodtech 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 Goodtech are associated (or correlated) with Waste Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Plastic Upcycling has no effect on the direction of Goodtech i.e., Goodtech and Waste Plastic go up and down completely randomly.

Pair Corralation between Goodtech and Waste Plastic

Assuming the 90 days trading horizon Goodtech is expected to generate 0.55 times more return on investment than Waste Plastic. However, Goodtech is 1.82 times less risky than Waste Plastic. It trades about -0.15 of its potential returns per unit of risk. Waste Plastic Upcycling is currently generating about -0.2 per unit of risk. If you would invest  1,155  in Goodtech on September 3, 2024 and sell it today you would lose (229.00) from holding Goodtech or give up 19.83% of portfolio value over 90 days.

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

Goodtech  vs.  Waste Plastic Upcycling

Goodtech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodtech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators 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.

Waste Plastic Upcycling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Plastic Upcycling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators 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 Goodtech and Waste Plastic

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

The idea behind Goodtech and Waste Plastic Upcycling 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.