Correlation Between Royal Helium and GreenPower

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

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

Diversification Opportunities for Royal Helium and GreenPower

0.81

Correlation Coefficient

Royal Helium  GreenPower

Very poor diversification

The 3 months correlation between Royal and GreenPower is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Royal Helium and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor and Royal Helium 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 Royal Helium are associated (or correlated) with GreenPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPower Motor has no effect on the direction of Royal Helium i.e., Royal Helium and GreenPower go up and down completely randomly.

Pair Corralation between Royal Helium and GreenPower

Assuming the 90 days horizon Royal Helium is expected to under-perform the GreenPower. In addition to that, Royal Helium is 1.19 times more volatile than GreenPower Motor. It trades about 0.0 of its total potential returns per unit of risk. GreenPower Motor is currently generating about 0.06 per unit of volatility. If you would invest  123.00  in GreenPower Motor on September 5, 2024 and sell it today you would earn a total of  13.00  from holding GreenPower Motor or generate 10.57% return on investment over 90 days.

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

Royal Helium  vs.  GreenPower Motor

Royal Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Helium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Royal Helium is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

GreenPower Motor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GreenPower Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, GreenPower showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Helium and GreenPower

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

The idea behind Royal Helium and GreenPower Motor 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.