Correlation Between FBD Holdings and Greencoat Renewables

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

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

Diversification Opportunities for FBD Holdings and Greencoat Renewables

-0.26

Correlation Coefficient

FBD Holdings  Greencoat Renewables

Very good diversification

The 3 months correlation between FBD and Greencoat is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding FBD Holdings PLC and Greencoat Renewables PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greencoat Renewables PLC and FBD Holdings 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 FBD Holdings PLC are associated (or correlated) with Greencoat Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greencoat Renewables PLC has no effect on the direction of FBD Holdings i.e., FBD Holdings and Greencoat Renewables go up and down completely randomly.

Pair Corralation between FBD Holdings and Greencoat Renewables

Assuming the 90 days trading horizon FBD Holdings PLC is expected to under-perform the Greencoat Renewables. In addition to that, FBD Holdings is 1.72 times more volatile than Greencoat Renewables PLC. It trades about -0.08 of its total potential returns per unit of risk. Greencoat Renewables PLC is currently generating about -0.03 per unit of volatility. If you would invest  87.00  in Greencoat Renewables PLC on February 4, 2024 and sell it today you would lose (1.00) from holding Greencoat Renewables PLC or give up 1.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

FBD Holdings PLC  vs.  Greencoat Renewables PLC

FBD Holdings PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FBD Holdings PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, FBD Holdings may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Greencoat Renewables PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greencoat Renewables PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Greencoat Renewables is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with FBD Holdings and Greencoat Renewables

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

The idea behind FBD Holdings PLC and Greencoat Renewables 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.