Correlation Between Pudgy Penguins and Grass

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

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

Diversification Opportunities for Pudgy Penguins and Grass

-0.42

Correlation Coefficient

Pudgy Penguins  Grass

Very good diversification

The 3 months correlation between Pudgy and Grass is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Pudgy Penguins and Grass in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grass and Pudgy Penguins 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 Pudgy Penguins are associated (or correlated) with Grass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grass has no effect on the direction of Pudgy Penguins i.e., Pudgy Penguins and Grass go up and down completely randomly.

Pair Corralation between Pudgy Penguins and Grass

Assuming the 90 days trading horizon Pudgy Penguins is expected to generate 1.45 times more return on investment than Grass. However, Pudgy Penguins is 1.45 times more volatile than Grass. It trades about 0.27 of its potential returns per unit of risk. Grass is currently generating about -0.06 per unit of risk. If you would invest  0.66  in Pudgy Penguins on April 22, 2025 and sell it today you would earn a total of  2.43  from holding Pudgy Penguins or generate 366.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Pudgy Penguins  vs.  Grass

Pudgy Penguins

Risk-Adjusted Performance

Solid

Over the last 90 days Pudgy Penguins has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak fundamental indicators, Pudgy Penguins exhibited solid returns over the last few months and may actually be approaching a breakup point.

Grass

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grass has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for Grass shareholders.

Pair Trading with Pudgy Penguins and Grass

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

The idea behind Pudgy Penguins and Grass 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.