Correlation Between Charah Solutions and BluMetric Environmental

Can any of the company-specific risk be diversified away by investing in both Charah Solutions and BluMetric Environmental 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 Charah Solutions and BluMetric Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Charah Solutions and BluMetric Environmental

-0.17

Correlation Coefficient

Charah Solutions  BluMetric Environmental

Good diversification

The 3 months correlation between Charah and BluMetric is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Charah Solutions and BluMetric Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BluMetric Environmental and Charah Solutions 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 Charah Solutions are associated (or correlated) with BluMetric Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BluMetric Environmental has no effect on the direction of Charah Solutions i.e., Charah Solutions and BluMetric Environmental go up and down completely randomly.

Pair Corralation between Charah Solutions and BluMetric Environmental

Given the investment horizon of 90 days Charah Solutions is expected to generate 3.16 times more return on investment than BluMetric Environmental. However, Charah Solutions is 3.16 times more volatile than BluMetric Environmental. It trades about 0.03 of its potential returns per unit of risk. BluMetric Environmental is currently generating about 0.07 per unit of risk. If you would invest  644.00  in Charah Solutions on October 11, 2024 and sell it today you would lose (77.00) from holding Charah Solutions or give up 11.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	17.73%
Values	Daily Returns

Charah Solutions  vs.  BluMetric Environmental

Charah Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charah Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Charah Solutions is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BluMetric Environmental

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days BluMetric Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, BluMetric Environmental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charah Solutions and BluMetric Environmental

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

The idea behind Charah Solutions and BluMetric Environmental 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.