Correlation Between CVW CLEANTECH and Whitehaven Coal

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

By analyzing existing cross correlation between CVW CLEANTECH INC and Whitehaven Coal Limited, you can compare the effects of market volatilities on CVW CLEANTECH and Whitehaven Coal 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 Whitehaven Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVW CLEANTECH and Whitehaven Coal.

Diversification Opportunities for CVW CLEANTECH and Whitehaven Coal

-0.43

Correlation Coefficient

CVW CLEANTECH  Whitehaven Coal

Very good diversification

The 3 months correlation between CVW and Whitehaven is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding CVW CLEANTECH INC and Whitehaven Coal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 INC are associated (or correlated) with Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of CVW CLEANTECH i.e., CVW CLEANTECH and Whitehaven Coal go up and down completely randomly.

Pair Corralation between CVW CLEANTECH and Whitehaven Coal

Assuming the 90 days trading horizon CVW CLEANTECH INC is expected to generate 1.15 times more return on investment than Whitehaven Coal. However, CVW CLEANTECH is 1.15 times more volatile than Whitehaven Coal Limited. It trades about 0.01 of its potential returns per unit of risk. Whitehaven Coal Limited is currently generating about -0.06 per unit of risk. If you would invest  56.00  in CVW CLEANTECH INC on September 24, 2024 and sell it today you would earn a total of  0.00  from holding CVW CLEANTECH INC or generate 0.0% return on investment over 90 days.

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

CVW CLEANTECH INC  vs.  Whitehaven Coal Limited

CVW CLEANTECH INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Whitehaven Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitehaven Coal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CVW CLEANTECH and Whitehaven Coal

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

The idea behind CVW CLEANTECH INC and Whitehaven Coal Limited 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.