Correlation Between Greenwich Lifesciences and Berkeley Lights

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

Diversification Opportunities for Greenwich Lifesciences and Berkeley Lights

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Greenwich and Berkeley is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Greenwich Lifesciences and Berkeley Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkeley Lights and Greenwich Lifesciences 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 Greenwich Lifesciences are associated (or correlated) with Berkeley Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkeley Lights has no effect on the direction of Greenwich Lifesciences i.e., Greenwich Lifesciences and Berkeley Lights go up and down completely randomly.

Pair Corralation between Greenwich Lifesciences and Berkeley Lights

Given the investment horizon of 90 days Greenwich Lifesciences is expected to generate 1.17 times more return on investment than Berkeley Lights. However, Greenwich Lifesciences is 1.17 times more volatile than Berkeley Lights. It trades about 0.1 of its potential returns per unit of risk. Berkeley Lights is currently generating about 0.05 per unit of risk. If you would invest  774.00  in Greenwich Lifesciences on April 1, 2022 and sell it today you would earn a total of  84.00  from holding Greenwich Lifesciences or generate 10.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Greenwich Lifesciences  vs.  Berkeley Lights

 Performance (%) 
      Timeline 
Greenwich Lifesciences 
Greenwich Performance
0 of 100
Over the last 90 days Greenwich Lifesciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Greenwich Price Channel

Berkeley Lights 
Berkeley Performance
0 of 100
Over the last 90 days Berkeley Lights has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Berkeley Price Channel

Greenwich Lifesciences and Berkeley Lights Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Greenwich Lifesciences and Berkeley Lights

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

Greenwich Lifesciences

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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 Greenwich Lifesciences 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. Greenwich Lifesciences' 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, Greenwich Lifesciences' 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 Greenwich Lifesciences.
The idea behind Greenwich Lifesciences and Berkeley Lights 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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