Correlation Between Absolute Clean and CHUWIT FARM

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

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

Diversification Opportunities for Absolute Clean and CHUWIT FARM

0.05

Correlation Coefficient

Absolute Clean  CHUWIT FARM

Significant diversification

The 3 months correlation between Absolute and CHUWIT is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Clean Energy and CHUWIT FARM PUBLIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHUWIT FARM PUBLIC and Absolute Clean 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 Absolute Clean Energy are associated (or correlated) with CHUWIT FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHUWIT FARM PUBLIC has no effect on the direction of Absolute Clean i.e., Absolute Clean and CHUWIT FARM go up and down completely randomly.

Pair Corralation between Absolute Clean and CHUWIT FARM

Assuming the 90 days trading horizon Absolute Clean Energy is expected to generate 0.56 times more return on investment than CHUWIT FARM. However, Absolute Clean Energy is 1.8 times less risky than CHUWIT FARM. It trades about -0.07 of its potential returns per unit of risk. CHUWIT FARM PUBLIC is currently generating about -0.3 per unit of risk. If you would invest  142.00  in Absolute Clean Energy on September 5, 2024 and sell it today you would lose (9.00) from holding Absolute Clean Energy or give up 6.34% of portfolio value over 90 days.

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

Absolute Clean Energy  vs.  CHUWIT FARM PUBLIC

Absolute Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Absolute Clean is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CHUWIT FARM PUBLIC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHUWIT FARM PUBLIC 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 fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Absolute Clean and CHUWIT FARM

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

The idea behind Absolute Clean Energy and CHUWIT FARM PUBLIC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.