Correlation Between Clearway Energy and Energy Vault

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

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

Diversification Opportunities for Clearway Energy and Energy Vault

-0.26

Correlation Coefficient

Clearway Energy  Energy Vault

Very good diversification

The 3 months correlation between Clearway and Energy is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Clearway Energy and Energy Vault Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Vault Holdings and Clearway Energy 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 Clearway Energy are associated (or correlated) with Energy Vault. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Vault Holdings has no effect on the direction of Clearway Energy i.e., Clearway Energy and Energy Vault go up and down completely randomly.

Pair Corralation between Clearway Energy and Energy Vault

Assuming the 90 days trading horizon Clearway Energy is expected to generate 11.25 times less return on investment than Energy Vault. But when comparing it to its historical volatility, Clearway Energy is 3.21 times less risky than Energy Vault. It trades about 0.01 of its potential returns per unit of risk. Energy Vault Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  150.00  in Energy Vault Holdings on September 11, 2024 and sell it today you would earn a total of  27.00  from holding Energy Vault Holdings or generate 18.0% return on investment over 90 days.

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

Clearway Energy  vs.  Energy Vault Holdings

Clearway Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Clearway Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Energy Vault Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Vault Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Energy Vault showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clearway Energy and Energy Vault

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

The idea behind Clearway Energy and Energy Vault Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.