Correlation Between Aker Carbon and Energy Recovery

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

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

Diversification Opportunities for Aker Carbon and Energy Recovery

-0.63

Correlation Coefficient

Aker Carbon  Energy Recovery

Excellent diversification

The 3 months correlation between Aker and Energy is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Aker Carbon Capture and Energy Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Recovery and Aker Carbon 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 Aker Carbon Capture are associated (or correlated) with Energy Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Recovery has no effect on the direction of Aker Carbon i.e., Aker Carbon and Energy Recovery go up and down completely randomly.

Pair Corralation between Aker Carbon and Energy Recovery

Assuming the 90 days horizon Aker Carbon Capture is expected to under-perform the Energy Recovery. In addition to that, Aker Carbon is 4.35 times more volatile than Energy Recovery. It trades about -0.02 of its total potential returns per unit of risk. Energy Recovery is currently generating about 0.08 per unit of volatility. If you would invest  1,472  in Energy Recovery on December 28, 2024 and sell it today you would earn a total of  123.00  from holding Energy Recovery or generate 8.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Aker Carbon Capture  vs.  Energy Recovery

Aker Carbon Capture

Risk-Adjusted Performance

Very Weak

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

Energy Recovery

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Recovery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Energy Recovery may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aker Carbon and Energy Recovery

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

The idea behind Aker Carbon Capture and Energy Recovery 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.