Correlation Between CVW CleanTech and Solventum Corp

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

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

Diversification Opportunities for CVW CleanTech and Solventum Corp

-0.32

Correlation Coefficient

CVW CleanTech  Solventum Corp

Very good diversification

The 3 months correlation between CVW and Solventum is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Solventum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solventum 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 Solventum Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solventum Corp has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Solventum Corp go up and down completely randomly.

Pair Corralation between CVW CleanTech and Solventum Corp

Assuming the 90 days horizon CVW CleanTech is expected to generate 0.59 times more return on investment than Solventum Corp. However, CVW CleanTech is 1.7 times less risky than Solventum Corp. It trades about 0.18 of its potential returns per unit of risk. Solventum Corp is currently generating about 0.0 per unit of risk. If you would invest  59.00  in CVW CleanTech on September 5, 2024 and sell it today you would earn a total of  2.00  from holding CVW CleanTech or generate 3.39% return on investment over 90 days.

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

CVW CleanTech  vs.  Solventum Corp

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.

Solventum Corp

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solventum Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Solventum Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CVW CleanTech and Solventum Corp

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

The idea behind CVW CleanTech and Solventum 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.