Correlation Between American Security and Carnegie Clean

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

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

Diversification Opportunities for American Security and Carnegie Clean

0.02

Correlation Coefficient

American Security  Carnegie Clean

Significant diversification

The 3 months correlation between American and Carnegie is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding American Security Resources and Carnegie Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnegie Clean Energy and American Security 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 American Security Resources are associated (or correlated) with Carnegie Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnegie Clean Energy has no effect on the direction of American Security i.e., American Security and Carnegie Clean go up and down completely randomly.

Pair Corralation between American Security and Carnegie Clean

Given the investment horizon of 90 days American Security Resources is expected to generate 1.17 times more return on investment than Carnegie Clean. However, American Security is 1.17 times more volatile than Carnegie Clean Energy. It trades about 0.1 of its potential returns per unit of risk. Carnegie Clean Energy is currently generating about 0.11 per unit of risk. If you would invest  0.01  in American Security Resources on December 30, 2024 and sell it today you would earn a total of  0.00  from holding American Security Resources or generate 0.0% return on investment over 90 days.

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

American Security Resources  vs.  Carnegie Clean Energy

American Security

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Security Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Security exhibited solid returns over the last few months and may actually be approaching a breakup point.

Carnegie Clean Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carnegie Clean Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Carnegie Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Security and Carnegie Clean

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

The idea behind American Security Resources and Carnegie Clean 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.