Correlation Between CleanCore Solutions and Federal Signal

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

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

Diversification Opportunities for CleanCore Solutions and Federal Signal

-0.04

Correlation Coefficient

CleanCore Solutions  Federal Signal

Good diversification

The 3 months correlation between CleanCore and Federal is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CleanCore Solutions and Federal Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Signal and CleanCore Solutions 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 CleanCore Solutions are associated (or correlated) with Federal Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Signal has no effect on the direction of CleanCore Solutions i.e., CleanCore Solutions and Federal Signal go up and down completely randomly.

Pair Corralation between CleanCore Solutions and Federal Signal

Given the investment horizon of 90 days CleanCore Solutions is expected to generate 4.8 times more return on investment than Federal Signal. However, CleanCore Solutions is 4.8 times more volatile than Federal Signal. It trades about 0.01 of its potential returns per unit of risk. Federal Signal is currently generating about 0.0 per unit of risk. If you would invest  162.00  in CleanCore Solutions on September 24, 2024 and sell it today you would lose (28.00) from holding CleanCore Solutions or give up 17.28% of portfolio value over 90 days.

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

CleanCore Solutions  vs.  Federal Signal

CleanCore Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CleanCore Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CleanCore Solutions is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Federal Signal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Signal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Federal Signal is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CleanCore Solutions and Federal Signal

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

The idea behind CleanCore Solutions and Federal Signal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.