Correlation Between CK Power and Better World

Can any of the company-specific risk be diversified away by investing in both CK Power and Better World 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 Better World 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 Better World Green, you can compare the effects of market volatilities on CK Power and Better World 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 Better World. Check out your portfolio center. Please also check ongoing floating volatility patterns of CK Power and Better World.

Diversification Opportunities for CK Power and Better World

0.59

Correlation Coefficient

CK Power  Better World

Very weak diversification

The 3 months correlation between CKP and Better is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CK Power Public and Better World Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better World Green 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 Better World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better World Green has no effect on the direction of CK Power i.e., CK Power and Better World go up and down completely randomly.

Pair Corralation between CK Power and Better World

Assuming the 90 days trading horizon CK Power Public is expected to under-perform the Better World. But the stock apears to be less risky and, when comparing its historical volatility, CK Power Public is 2.08 times less risky than Better World. The stock trades about -0.1 of its potential returns per unit of risk. The Better World Green is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Better World Green on August 31, 2024 and sell it today you would lose (2.00) from holding Better World Green or give up 4.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

CK Power Public  vs.  Better World Green

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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Better World Green

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better World Green has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Better World is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CK Power and Better World

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

The idea behind CK Power Public and Better World Green 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.