Correlation Between NewJersey Resources and OPAL Fuels

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

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

Diversification Opportunities for NewJersey Resources and OPAL Fuels

0.11

Correlation Coefficient

NewJersey Resources  OPAL Fuels

Average diversification

The 3 months correlation between NewJersey and OPAL is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding NewJersey Resources and OPAL Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPAL Fuels and NewJersey Resources 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 NewJersey Resources are associated (or correlated) with OPAL Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPAL Fuels has no effect on the direction of NewJersey Resources i.e., NewJersey Resources and OPAL Fuels go up and down completely randomly.

Pair Corralation between NewJersey Resources and OPAL Fuels

Considering the 90-day investment horizon NewJersey Resources is expected to generate 0.44 times more return on investment than OPAL Fuels. However, NewJersey Resources is 2.29 times less risky than OPAL Fuels. It trades about 0.08 of its potential returns per unit of risk. OPAL Fuels is currently generating about -0.04 per unit of risk. If you would invest  4,189  in NewJersey Resources on September 30, 2024 and sell it today you would earn a total of  463.00  from holding NewJersey Resources or generate 11.05% return on investment over 90 days.

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

NewJersey Resources  vs.  OPAL Fuels

NewJersey Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NewJersey Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking indicators, NewJersey Resources is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

OPAL Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OPAL Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with NewJersey Resources and OPAL Fuels

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

The idea behind NewJersey Resources and OPAL Fuels 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.