Correlation Between CVW CleanTech and Hercules Metals

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

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

Diversification Opportunities for CVW CleanTech and Hercules Metals

0.31

Correlation Coefficient

CVW CleanTech  Hercules Metals

Weak diversification

The 3 months correlation between CVW and Hercules is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Hercules Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Metals Corp and CVW CleanTech 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 CVW CleanTech are associated (or correlated) with Hercules Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Metals Corp has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Hercules Metals go up and down completely randomly.

Pair Corralation between CVW CleanTech and Hercules Metals

Assuming the 90 days horizon CVW CleanTech is expected to generate 7.92 times less return on investment than Hercules Metals. But when comparing it to its historical volatility, CVW CleanTech is 1.41 times less risky than Hercules Metals. It trades about 0.01 of its potential returns per unit of risk. Hercules Metals Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Hercules Metals Corp on September 29, 2024 and sell it today you would earn a total of  43.00  from holding Hercules Metals Corp or generate 307.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

CVW CleanTech  vs.  Hercules Metals Corp

CVW CleanTech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CVW CleanTech showed solid returns over the last few months and may actually be approaching a breakup point.

Hercules Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hercules Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hercules Metals is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CVW CleanTech and Hercules Metals

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

The idea behind CVW CleanTech and Hercules Metals Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.