Correlation Between CEA Industries and NeoVolta Warrant

Can any of the company-specific risk be diversified away by investing in both CEA Industries and NeoVolta Warrant 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 CEA Industries and NeoVolta Warrant into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for CEA Industries and NeoVolta Warrant

-0.29

Correlation Coefficient

CEA Industries  NeoVolta Warrant

Very good diversification

The 3 months correlation between CEA and NeoVolta is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries Warrant and NeoVolta Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeoVolta Warrant and CEA Industries 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 CEA Industries Warrant are associated (or correlated) with NeoVolta Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeoVolta Warrant has no effect on the direction of CEA Industries i.e., CEA Industries and NeoVolta Warrant go up and down completely randomly.

Pair Corralation between CEA Industries and NeoVolta Warrant

Assuming the 90 days horizon CEA Industries Warrant is expected to generate 2.65 times more return on investment than NeoVolta Warrant. However, CEA Industries is 2.65 times more volatile than NeoVolta Warrant. It trades about 0.17 of its potential returns per unit of risk. NeoVolta Warrant is currently generating about 0.04 per unit of risk. If you would invest  1.75  in CEA Industries Warrant on December 5, 2024 and sell it today you would earn a total of  0.75  from holding CEA Industries Warrant or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

CEA Industries Warrant  vs.  NeoVolta Warrant

CEA Industries Warrant

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEA Industries Warrant are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, CEA Industries showed solid returns over the last few months and may actually be approaching a breakup point.

NeoVolta Warrant

Risk-Adjusted Performance

Very Weak

Over the last 90 days NeoVolta Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with CEA Industries and NeoVolta Warrant

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

The idea behind CEA Industries Warrant and NeoVolta Warrant 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..