Correlation Between American Security and Verde Clean

Can any of the company-specific risk be diversified away by investing in both American Security 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 American Security and Verde 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 Verde Clean Fuels, you can compare the effects of market volatilities on American Security 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 American Security with a short position of Verde Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Security and Verde Clean.

Diversification Opportunities for American Security and Verde Clean

-0.39

Correlation Coefficient

American Security  Verde Clean

Very good diversification

The 3 months correlation between American and Verde is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Security Resources 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 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 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 American Security i.e., American Security and Verde Clean go up and down completely randomly.

Pair Corralation between American Security and Verde Clean

Given the investment horizon of 90 days American Security Resources is expected to generate 2.24 times more return on investment than Verde Clean. However, American Security is 2.24 times more volatile than Verde Clean Fuels. It trades about 0.14 of its potential returns per unit of risk. Verde Clean Fuels is currently generating about -0.04 per unit of risk. If you would invest  0.01  in American Security Resources on December 29, 2024 and sell it today you would earn a total of  0.01  from holding American Security Resources or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.71%
Values	Daily Returns

American Security Resources  vs.  Verde Clean Fuels

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 10 (%) 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.

Verde Clean Fuels

Risk-Adjusted Performance

Very 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 conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with American Security and Verde Clean

The main advantage of trading using opposite American Security and Verde Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Security 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 American Security Resources 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.