Correlation Between GRIN and Avalanche

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

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

Diversification Opportunities for GRIN and Avalanche

0.7

Correlation Coefficient

GRIN  Avalanche

Poor diversification

The 3 months correlation between GRIN and Avalanche is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding GRIN and Avalanche in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalanche and GRIN 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 GRIN are associated (or correlated) with Avalanche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalanche has no effect on the direction of GRIN i.e., GRIN and Avalanche go up and down completely randomly.

Pair Corralation between GRIN and Avalanche

Assuming the 90 days trading horizon GRIN is expected to generate 1.56 times less return on investment than Avalanche. But when comparing it to its historical volatility, GRIN is 1.0 times less risky than Avalanche. It trades about 0.15 of its potential returns per unit of risk. Avalanche is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,138  in Avalanche on September 2, 2024 and sell it today you would earn a total of  2,347  from holding Avalanche or generate 109.78% return on investment over 90 days.

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

GRIN  vs.  Avalanche

GRIN

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GRIN are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, GRIN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Avalanche

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Avalanche are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Avalanche exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GRIN and Avalanche

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

The idea behind GRIN and Avalanche 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.