Correlation Between CK Power and Absolute Clean

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

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

Diversification Opportunities for CK Power and Absolute Clean

0.67

Correlation Coefficient

CK Power  Absolute Clean

Poor diversification

The 3 months correlation between CKP-R and Absolute is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding CK Power Public and Absolute Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Clean Energy and CK Power 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 CK Power Public are associated (or correlated) with Absolute Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Clean Energy has no effect on the direction of CK Power i.e., CK Power and Absolute Clean go up and down completely randomly.

Pair Corralation between CK Power and Absolute Clean

Assuming the 90 days trading horizon CK Power Public is expected to under-perform the Absolute Clean. In addition to that, CK Power is 1.37 times more volatile than Absolute Clean Energy. It trades about -0.15 of its total potential returns per unit of risk. Absolute Clean Energy is currently generating about -0.11 per unit of volatility. If you would invest  145.00  in Absolute Clean Energy on September 12, 2024 and sell it today you would lose (13.00) from holding Absolute Clean Energy or give up 8.97% of portfolio value over 90 days.

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

CK Power Public  vs.  Absolute Clean Energy

CK Power Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CK Power Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Absolute Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with CK Power and Absolute Clean

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

The idea behind CK Power Public and Absolute 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.