Correlation Between ClearSign Combustion and Zurn Elkay

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

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

Diversification Opportunities for ClearSign Combustion and Zurn Elkay

0.23

Correlation Coefficient

ClearSign Combustion  Zurn Elkay

Modest diversification

The 3 months correlation between ClearSign and Zurn is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ClearSign Combustion and Zurn Elkay Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurn Elkay 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 Zurn Elkay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zurn Elkay Water has no effect on the direction of ClearSign Combustion i.e., ClearSign Combustion and Zurn Elkay go up and down completely randomly.

Pair Corralation between ClearSign Combustion and Zurn Elkay

Given the investment horizon of 90 days ClearSign Combustion is expected to generate 8.77 times more return on investment than Zurn Elkay. However, ClearSign Combustion is 8.77 times more volatile than Zurn Elkay Water. It trades about 0.15 of its potential returns per unit of risk. Zurn Elkay Water is currently generating about 0.14 per unit of risk. If you would invest  111.00  in ClearSign Combustion on October 25, 2024 and sell it today you would earn a total of  23.00  from holding ClearSign Combustion or generate 20.72% return on investment over 90 days.

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

ClearSign Combustion  vs.  Zurn Elkay Water

ClearSign Combustion

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ClearSign Combustion are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting forward indicators, ClearSign Combustion reported solid returns over the last few months and may actually be approaching a breakup point.

Zurn Elkay Water

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zurn Elkay Water are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Zurn Elkay may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ClearSign Combustion and Zurn Elkay

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

The idea behind ClearSign Combustion and Zurn Elkay 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.