Correlation Between Cleantech Biofuels and Asia Carbon

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

By analyzing existing cross correlation between Cleantech Biofuels and Asia Carbon Industries, you can compare the effects of market volatilities on Cleantech Biofuels and Asia Carbon 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 Cleantech Biofuels with a short position of Asia Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cleantech Biofuels and Asia Carbon.

Diversification Opportunities for Cleantech Biofuels and Asia Carbon

1.0

Correlation Coefficient

Cleantech Biofuels  Asia Carbon

No risk reduction

The 3 months correlation between Cleantech and Asia is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Cleantech Biofuels and Asia Carbon Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Carbon Industries and Cleantech Biofuels 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 Cleantech Biofuels are associated (or correlated) with Asia Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Carbon Industries has no effect on the direction of Cleantech Biofuels i.e., Cleantech Biofuels and Asia Carbon go up and down completely randomly.

Pair Corralation between Cleantech Biofuels and Asia Carbon

If you would invest  0.01  in Asia Carbon Industries on October 24, 2024 and sell it today you would earn a total of  0.00  from holding Asia Carbon Industries or generate 0.0% return on investment over 90 days.

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

Cleantech Biofuels  vs.  Asia Carbon Industries

Cleantech Biofuels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cleantech Biofuels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Cleantech Biofuels is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Asia Carbon Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Carbon Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Asia Carbon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cleantech Biofuels and Asia Carbon

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

The idea behind Cleantech Biofuels and Asia Carbon Industries 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.