Correlation Between New Generation and Verde Bio

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

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

Diversification Opportunities for New Generation and Verde Bio

-0.15

Correlation Coefficient

New Generation  Verde Bio

Good diversification

The 3 months correlation between New and Verde is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding New Generation Consumer and Verde Bio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verde Bio Holdings and New Generation 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 New Generation Consumer are associated (or correlated) with Verde Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verde Bio Holdings has no effect on the direction of New Generation i.e., New Generation and Verde Bio go up and down completely randomly.

Pair Corralation between New Generation and Verde Bio

Given the investment horizon of 90 days New Generation is expected to generate 1.78 times less return on investment than Verde Bio. In addition to that, New Generation is 1.24 times more volatile than Verde Bio Holdings. It trades about 0.06 of its total potential returns per unit of risk. Verde Bio Holdings is currently generating about 0.13 per unit of volatility. If you would invest  0.01  in Verde Bio Holdings on September 18, 2024 and sell it today you would earn a total of  0.01  from holding Verde Bio Holdings or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

New Generation Consumer  vs.  Verde Bio Holdings

New Generation Consumer

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Generation Consumer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, New Generation reported solid returns over the last few months and may actually be approaching a breakup point.

Verde Bio Holdings

Risk-Adjusted Performance

9 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Verde Bio Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, Verde Bio exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Generation and Verde Bio

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

The idea behind New Generation Consumer and Verde Bio Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..