Correlation Between Great Wes and Guru Organic

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

By analyzing existing cross correlation between Great Wes 515 and Guru Organic Energy, you can compare the effects of market volatilities on Great Wes and Guru Organic 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 Great Wes with a short position of Guru Organic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wes and Guru Organic.

Diversification Opportunities for Great Wes and Guru Organic

0.25

Correlation Coefficient

Great Wes  Guru Organic

Modest diversification

The 3 months correlation between Great and Guru is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Great Wes 515 and Guru Organic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guru Organic Energy and Great Wes 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 Great Wes 515 are associated (or correlated) with Guru Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guru Organic Energy has no effect on the direction of Great Wes i.e., Great Wes and Guru Organic go up and down completely randomly.

Pair Corralation between Great Wes and Guru Organic

Assuming the 90 days trading horizon Great Wes 515 is expected to generate 0.19 times more return on investment than Guru Organic. However, Great Wes 515 is 5.22 times less risky than Guru Organic. It trades about -0.02 of its potential returns per unit of risk. Guru Organic Energy is currently generating about -0.05 per unit of risk. If you would invest  2,184  in Great Wes 515 on September 14, 2024 and sell it today you would lose (24.00) from holding Great Wes 515 or give up 1.1% of portfolio value over 90 days.

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

Great Wes 515  vs.  Guru Organic Energy

Great Wes 515

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Wes 515 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Great Wes is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Guru Organic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guru Organic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Great Wes and Guru Organic

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

The idea behind Great Wes 515 and Guru Organic Energy 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.