Correlation Between Smart Powerr and Verde Clean

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

By analyzing existing cross correlation between Smart Powerr Corp and Verde Clean Fuels, you can compare the effects of market volatilities on Smart Powerr and Verde 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 Smart Powerr with a short position of Verde Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Powerr and Verde Clean.

Diversification Opportunities for Smart Powerr and Verde Clean

0.19

Correlation Coefficient

Smart Powerr  Verde Clean

Average diversification

The 3 months correlation between Smart and Verde is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Smart Powerr Corp and Verde Clean Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verde Clean Fuels and Smart Powerr 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 Smart Powerr Corp are associated (or correlated) with Verde Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verde Clean Fuels has no effect on the direction of Smart Powerr i.e., Smart Powerr and Verde Clean go up and down completely randomly.

Pair Corralation between Smart Powerr and Verde Clean

Given the investment horizon of 90 days Smart Powerr Corp is expected to under-perform the Verde Clean. But the stock apears to be less risky and, when comparing its historical volatility, Smart Powerr Corp is 2.33 times less risky than Verde Clean. The stock trades about -0.01 of its potential returns per unit of risk. The Verde Clean Fuels is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Verde Clean Fuels on December 28, 2024 and sell it today you would lose (7.00) from holding Verde Clean Fuels or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Smart Powerr Corp  vs.  Verde Clean Fuels

Smart Powerr Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smart Powerr Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Smart Powerr is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Verde Clean Fuels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Verde Clean Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Verde Clean is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Smart Powerr and Verde Clean

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

The idea behind Smart Powerr Corp and Verde Clean Fuels 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.