Correlation Between CVR Energy and Heavitree Brewery

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

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

Diversification Opportunities for CVR Energy and Heavitree Brewery

0.47

Correlation Coefficient

CVR Energy  Heavitree Brewery

Very weak diversification

The 3 months correlation between CVR and Heavitree is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and Heavitree Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heavitree Brewery and CVR Energy 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 CVR Energy are associated (or correlated) with Heavitree Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heavitree Brewery has no effect on the direction of CVR Energy i.e., CVR Energy and Heavitree Brewery go up and down completely randomly.

Pair Corralation between CVR Energy and Heavitree Brewery

Assuming the 90 days trading horizon CVR Energy is expected to under-perform the Heavitree Brewery. In addition to that, CVR Energy is 10.37 times more volatile than Heavitree Brewery. It trades about -0.06 of its total potential returns per unit of risk. Heavitree Brewery is currently generating about -0.12 per unit of volatility. If you would invest  29,000  in Heavitree Brewery on September 3, 2024 and sell it today you would lose (1,000.00) from holding Heavitree Brewery or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

CVR Energy  vs.  Heavitree Brewery

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Heavitree Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heavitree Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Heavitree Brewery is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CVR Energy and Heavitree Brewery

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

The idea behind CVR Energy and Heavitree Brewery 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.