Correlation Between Planet Green and Borealis Foods

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

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

Diversification Opportunities for Planet Green and Borealis Foods

0.64

Correlation Coefficient

Planet Green  Borealis Foods

Poor diversification

The 3 months correlation between Planet and Borealis is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Planet Green Holdings and Borealis Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borealis Foods and Planet Green 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 Planet Green Holdings are associated (or correlated) with Borealis Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borealis Foods has no effect on the direction of Planet Green i.e., Planet Green and Borealis Foods go up and down completely randomly.

Pair Corralation between Planet Green and Borealis Foods

Given the investment horizon of 90 days Planet Green is expected to generate 9.85 times less return on investment than Borealis Foods. But when comparing it to its historical volatility, Planet Green Holdings is 3.77 times less risky than Borealis Foods. It trades about 0.03 of its potential returns per unit of risk. Borealis Foods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Borealis Foods on March 2, 2024 and sell it today you would lose (0.49) from holding Borealis Foods or give up 4.9% of portfolio value over 90 days.

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

Planet Green Holdings  vs.  Borealis Foods

Planet Green Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Planet Green Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Borealis Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Borealis Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Borealis Foods may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Planet Green and Borealis Foods

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

The idea behind Planet Green Holdings and Borealis Foods 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .