Correlation Between CVW CleanTech and Capital Clean

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

By analyzing existing cross correlation between CVW CleanTech and Capital Clean Energy, you can compare the effects of market volatilities on CVW CleanTech and Capital Clean 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 Capital Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVW CleanTech and Capital Clean.

Diversification Opportunities for CVW CleanTech and Capital Clean

0.07

Correlation Coefficient

CVW CleanTech  Capital Clean

Significant diversification

The 3 months correlation between CVW and Capital is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Capital Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Clean Energy 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 Capital Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Clean Energy has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Capital Clean go up and down completely randomly.

Pair Corralation between CVW CleanTech and Capital Clean

Assuming the 90 days horizon CVW CleanTech is expected to under-perform the Capital Clean. In addition to that, CVW CleanTech is 1.38 times more volatile than Capital Clean Energy. It trades about -0.01 of its total potential returns per unit of risk. Capital Clean Energy is currently generating about 0.07 per unit of volatility. If you would invest  1,707  in Capital Clean Energy on September 5, 2024 and sell it today you would earn a total of  136.00  from holding Capital Clean Energy or generate 7.97% return on investment over 90 days.

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

CVW CleanTech  vs.  Capital Clean Energy

CVW CleanTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVW CleanTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CVW CleanTech is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Capital Clean Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Clean Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Capital Clean may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CVW CleanTech and Capital Clean

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

The idea behind CVW CleanTech and Capital Clean Energy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.