Correlation Between Green Plains and Lsb Industries

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

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

Diversification Opportunities for Green Plains and Lsb Industries

-0.5

Correlation Coefficient

Green Plains  Lsb Industries

Very good diversification

The 3 months correlation between Green and Lsb is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Green Plains Renewable and Lsb Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsb Industries and Green Plains 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 Green Plains Renewable are associated (or correlated) with Lsb Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsb Industries has no effect on the direction of Green Plains i.e., Green Plains and Lsb Industries go up and down completely randomly.

Pair Corralation between Green Plains and Lsb Industries

Given the investment horizon of 90 days Green Plains Renewable is expected to under-perform the Lsb Industries. In addition to that, Green Plains is 1.28 times more volatile than Lsb Industries. It trades about -0.11 of its total potential returns per unit of risk. Lsb Industries is currently generating about 0.07 per unit of volatility. If you would invest  804.00  in Lsb Industries on August 30, 2024 and sell it today you would earn a total of  62.00  from holding Lsb Industries or generate 7.71% return on investment over 90 days.

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

Green Plains Renewable  vs.  Lsb Industries

Green Plains Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Plains Renewable has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lsb Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lsb Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Lsb Industries may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Green Plains and Lsb Industries

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

The idea behind Green Plains Renewable and Lsb Industries 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.