Correlation Between ClearSign Combustion and Energy

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

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

Diversification Opportunities for ClearSign Combustion and Energy

0.54

Correlation Coefficient

ClearSign Combustion  Energy

Very weak diversification

The 3 months correlation between ClearSign and Energy is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ClearSign Combustion and Energy and Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy and Water and ClearSign Combustion 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 ClearSign Combustion are associated (or correlated) with Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy and Water has no effect on the direction of ClearSign Combustion i.e., ClearSign Combustion and Energy go up and down completely randomly.

Pair Corralation between ClearSign Combustion and Energy

Given the investment horizon of 90 days ClearSign Combustion is expected to under-perform the Energy. But the stock apears to be less risky and, when comparing its historical volatility, ClearSign Combustion is 2.64 times less risky than Energy. The stock trades about -0.17 of its potential returns per unit of risk. The Energy and Water is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.38  in Energy and Water on December 29, 2024 and sell it today you would lose (0.16) from holding Energy and Water or give up 42.11% of portfolio value over 90 days.

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

ClearSign Combustion  vs.  Energy and Water

ClearSign Combustion

Risk-Adjusted Performance

Very Weak

Over the last 90 days ClearSign Combustion has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Energy and Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy and Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ClearSign Combustion and Energy

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

The idea behind ClearSign Combustion and Energy and Water 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.