Correlation Between Superior Plus and Clean Energy

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

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

Diversification Opportunities for Superior Plus and Clean Energy

0.01

Correlation Coefficient

Superior Plus  Clean Energy

Significant diversification

The 3 months correlation between Superior and Clean is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Clean Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Fuels and Superior Plus 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 Superior Plus Corp are associated (or correlated) with Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Fuels has no effect on the direction of Superior Plus i.e., Superior Plus and Clean Energy go up and down completely randomly.

Pair Corralation between Superior Plus and Clean Energy

Assuming the 90 days horizon Superior Plus is expected to generate 11.55 times less return on investment than Clean Energy. But when comparing it to its historical volatility, Superior Plus Corp is 1.72 times less risky than Clean Energy. It trades about 0.01 of its potential returns per unit of risk. Clean Energy Fuels is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  248.00  in Clean Energy Fuels on September 19, 2024 and sell it today you would earn a total of  13.00  from holding Clean Energy Fuels or generate 5.24% return on investment over 90 days.

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

Superior Plus Corp  vs.  Clean Energy Fuels

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Clean Energy Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Superior Plus and Clean Energy

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

The idea behind Superior Plus Corp and Clean Energy 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.