Correlation Between Clean Science and Power Finance

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

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

Diversification Opportunities for Clean Science and Power Finance

0.11

Correlation Coefficient

Clean Science  Power Finance

Average diversification

The 3 months correlation between Clean and Power is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Clean Science and and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance and Clean Science 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 Clean Science and are associated (or correlated) with Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of Clean Science i.e., Clean Science and Power Finance go up and down completely randomly.

Pair Corralation between Clean Science and Power Finance

Assuming the 90 days trading horizon Clean Science and is expected to under-perform the Power Finance. But the stock apears to be less risky and, when comparing its historical volatility, Clean Science and is 1.39 times less risky than Power Finance. The stock trades about -0.11 of its potential returns per unit of risk. The Power Finance is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  54,314  in Power Finance on September 2, 2024 and sell it today you would lose (4,784) from holding Power Finance or give up 8.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Clean Science and  vs.  Power Finance

Clean Science

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Science and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Power Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Clean Science and Power Finance

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

The idea behind Clean Science and and Power Finance 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.