Correlation Between Aduro Clean and Energy

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

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

Diversification Opportunities for Aduro Clean and Energy

-0.42

Correlation Coefficient

Aduro Clean  Energy

Very good diversification

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

Pair Corralation between Aduro Clean and Energy

Assuming the 90 days horizon Aduro Clean Technologies is expected to generate 0.24 times more return on investment than Energy. However, Aduro Clean Technologies is 4.15 times less risky than Energy. It trades about 0.08 of its potential returns per unit of risk. Energy and Water is currently generating about -0.07 per unit of risk. If you would invest  482.00  in Aduro Clean Technologies on September 21, 2024 and sell it today you would earn a total of  78.00  from holding Aduro Clean Technologies or generate 16.18% return on investment over 90 days.

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

Aduro Clean Technologies  vs.  Energy and Water

Aduro Clean Technologies

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aduro Clean Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Aduro Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Energy and Water

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aduro Clean and Energy

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

The idea behind Aduro Clean Technologies and Energy and Water 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.