Correlation Between Absolute Clean and Super Energy

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

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

Diversification Opportunities for Absolute Clean and Super Energy

0.01

Correlation Coefficient

Absolute Clean  Super Energy

Significant diversification

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

Pair Corralation between Absolute Clean and Super Energy

Assuming the 90 days trading horizon Absolute Clean Energy is expected to under-perform the Super Energy. But the stock apears to be less risky and, when comparing its historical volatility, Absolute Clean Energy is 100.04 times less risky than Super Energy. The stock trades about -0.11 of its potential returns per unit of risk. The Super Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Super Energy on September 12, 2024 and sell it today you would lose (24.00) from holding Super Energy or give up 46.15% of portfolio value over 90 days.

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

Absolute Clean Energy  vs.  Super Energy

Absolute Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Super Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Super Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Super Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Absolute Clean and Super Energy

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

The idea behind Absolute Clean Energy and Super Energy 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.