Correlation Between Greenlight Cap and Uber Technologies

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Can any of the company-specific risk be diversified away by investing in both Greenlight Cap and Uber Technologies 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 Greenlight Cap and Uber Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Greenlight Cap Re and Uber Technologies, you can compare the effects of market volatilities on Greenlight Cap and Uber Technologies 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 Greenlight Cap with a short position of Uber Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Greenlight Cap and Uber Technologies.

Diversification Opportunities for Greenlight Cap and Uber Technologies

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Greenlight and Uber Technologies is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Greenlight Cap Re and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies and Greenlight Cap 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 Greenlight Cap Re are associated (or correlated) with Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Greenlight Cap i.e., Greenlight Cap and Uber Technologies go up and down completely randomly.

Pair Corralation between Greenlight Cap and Uber Technologies

Given the investment horizon of 90 days Greenlight Cap is expected to generate 1.15 times less return on investment than Uber Technologies. But when comparing it to its historical volatility, Greenlight Cap Re is 1.85 times less risky than Uber Technologies. It trades about 0.02 of its potential returns per unit of risk. Uber Technologies is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,380  in Uber Technologies on May 20, 2022 and sell it today you would lose (358.00)  from holding Uber Technologies or give up 10.59% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Greenlight Cap Re  vs.  Uber Technologies

 Performance (%) 
       Timeline  
Greenlight Cap Re 
Greenlight Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Greenlight Cap Re are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Greenlight Cap may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Greenlight Price Channel

Uber Technologies 
Uber Technologies Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Uber Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Uber Technologies Price Channel

Greenlight Cap and Uber Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Greenlight Cap and Uber Technologies

The main advantage of trading using opposite Greenlight Cap and Uber Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Greenlight Cap position performs unexpectedly, Uber Technologies 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 Uber Technologies will offset losses from the drop in Uber Technologies' long position.
The idea behind Greenlight Cap Re and Uber Technologies 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.

Uber Technologies

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Uber Technologies as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Uber Technologies' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Uber Technologies' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Uber Technologies.
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 Transaction History module to view history of all your transactions and understand their impact on performance.

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