Correlation Between ANZ Group and Verde Clean

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

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

Diversification Opportunities for ANZ Group and Verde Clean

0.33

Correlation Coefficient

ANZ Group  Verde Clean

Weak diversification

The 3 months correlation between ANZ and Verde is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding ANZ Group Holdings and Verde Clean Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verde Clean Fuels and ANZ Group 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 ANZ Group Holdings are associated (or correlated) with Verde Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verde Clean Fuels has no effect on the direction of ANZ Group i.e., ANZ Group and Verde Clean go up and down completely randomly.

Pair Corralation between ANZ Group and Verde Clean

Assuming the 90 days horizon ANZ Group Holdings is expected to under-perform the Verde Clean. But the otc stock apears to be less risky and, when comparing its historical volatility, ANZ Group Holdings is 1.55 times less risky than Verde Clean. The otc stock trades about -0.06 of its potential returns per unit of risk. The Verde Clean Fuels is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Verde Clean Fuels on December 4, 2024 and sell it today you would earn a total of  1.00  from holding Verde Clean Fuels or generate 0.25% return on investment over 90 days.

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

ANZ Group Holdings  vs.  Verde Clean Fuels

ANZ Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days ANZ Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Verde Clean Fuels

Risk-Adjusted Performance

Weak

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

Pair Trading with ANZ Group and Verde Clean

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

The idea behind ANZ Group Holdings and Verde Clean 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.