Correlation Between Green Plains and Hawkins

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

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

Diversification Opportunities for Green Plains and Hawkins

0.08

Correlation Coefficient

Green Plains  Hawkins

Significant diversification

The 3 months correlation between Green and Hawkins is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Green Plains Renewable and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins and Green Plains 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 Green Plains Renewable are associated (or correlated) with Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of Green Plains i.e., Green Plains and Hawkins go up and down completely randomly.

Pair Corralation between Green Plains and Hawkins

Given the investment horizon of 90 days Green Plains Renewable is expected to generate 1.72 times more return on investment than Hawkins. However, Green Plains is 1.72 times more volatile than Hawkins. It trades about 0.02 of its potential returns per unit of risk. Hawkins is currently generating about 0.01 per unit of risk. If you would invest  2,206  in Green Plains Renewable on January 24, 2024 and sell it today you would earn a total of  6.00  from holding Green Plains Renewable or generate 0.27% return on investment over 90 days.

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

Green Plains Renewable  vs.  Hawkins

Green Plains Renewable

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Green Plains Renewable are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Green Plains exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hawkins

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward-looking signals, Hawkins displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Green Plains and Hawkins

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

The idea behind Green Plains Renewable and Hawkins 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.