Correlation Between Energy Recovery and LiqTech International

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

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

Diversification Opportunities for Energy Recovery and LiqTech International

0.1

Correlation Coefficient

Energy Recovery  LiqTech International

Average diversification

The 3 months correlation between Energy and LiqTech is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Energy Recovery and LiqTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiqTech International and Energy Recovery 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 Energy Recovery are associated (or correlated) with LiqTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiqTech International has no effect on the direction of Energy Recovery i.e., Energy Recovery and LiqTech International go up and down completely randomly.

Pair Corralation between Energy Recovery and LiqTech International

Given the investment horizon of 90 days Energy Recovery is expected to generate 0.62 times more return on investment than LiqTech International. However, Energy Recovery is 1.62 times less risky than LiqTech International. It trades about -0.03 of its potential returns per unit of risk. LiqTech International is currently generating about -0.13 per unit of risk. If you would invest  1,705  in Energy Recovery on September 21, 2024 and sell it today you would lose (191.00) from holding Energy Recovery or give up 11.2% of portfolio value over 90 days.

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

Energy Recovery  vs.  LiqTech International

Energy Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

LiqTech International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiqTech International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Energy Recovery and LiqTech International

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

The idea behind Energy Recovery and LiqTech International 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.