Correlation Between Green Plains and Tronox Holdings

Can any of the company-specific risk be diversified away by investing in both Green Plains and Tronox 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 Green Plains and Tronox Holdings 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 Tronox Holdings PLC, you can compare the effects of market volatilities on Green Plains and Tronox 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 Green Plains with a short position of Tronox Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Plains and Tronox Holdings.

Diversification Opportunities for Green Plains and Tronox Holdings

0.52

Correlation Coefficient

Green Plains  Tronox Holdings

Very weak diversification

The 3 months correlation between Green and Tronox is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Green Plains Renewable and Tronox Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tronox Holdings PLC 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 Tronox Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tronox Holdings PLC has no effect on the direction of Green Plains i.e., Green Plains and Tronox Holdings go up and down completely randomly.

Pair Corralation between Green Plains and Tronox Holdings

Given the investment horizon of 90 days Green Plains Renewable is expected to under-perform the Tronox Holdings. In addition to that, Green Plains is 1.29 times more volatile than Tronox Holdings PLC. It trades about -0.06 of its total potential returns per unit of risk. Tronox Holdings PLC is currently generating about -0.02 per unit of volatility. If you would invest  1,295  in Tronox Holdings PLC on September 2, 2024 and sell it today you would lose (85.00) from holding Tronox Holdings PLC or give up 6.56% of portfolio value over 90 days.

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

Green Plains Renewable  vs.  Tronox Holdings PLC

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Tronox Holdings PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tronox Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Tronox Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Green Plains and Tronox Holdings

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

The idea behind Green Plains Renewable and Tronox Holdings PLC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.