Correlation Between Energy Of and Montauk Renewables

Can any of the company-specific risk be diversified away by investing in both Energy Of and Montauk Renewables 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 Energy Of and Montauk Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Energy of Minas and Montauk Renewables, you can compare the effects of market volatilities on Energy Of and Montauk Renewables 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 Energy Of with a short position of Montauk Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Of and Montauk Renewables.

Diversification Opportunities for Energy Of and Montauk Renewables

-0.27

Correlation Coefficient

Energy Of  Montauk Renewables

Very good diversification

The 3 months correlation between Energy and Montauk is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Energy of Minas and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables and Energy Of 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 Energy of Minas are associated (or correlated) with Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Energy Of i.e., Energy Of and Montauk Renewables go up and down completely randomly.

Pair Corralation between Energy Of and Montauk Renewables

Assuming the 90 days horizon Energy of Minas is expected to under-perform the Montauk Renewables. But the stock apears to be less risky and, when comparing its historical volatility, Energy of Minas is 1.87 times less risky than Montauk Renewables. The stock trades about 0.0 of its potential returns per unit of risk. The Montauk Renewables is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  432.00  in Montauk Renewables on August 31, 2024 and sell it today you would earn a total of  11.00  from holding Montauk Renewables or generate 2.55% return on investment over 90 days.

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

Energy of Minas  vs.  Montauk Renewables

Energy of Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy of Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Energy Of is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Montauk Renewables

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Montauk Renewables are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Montauk Renewables may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Energy Of and Montauk Renewables

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

The idea behind Energy of Minas and Montauk Renewables 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.