Correlation Between Clover Power and Earth Tech

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

By analyzing existing cross correlation between Clover Power PCL and Earth Tech Environment, you can compare the effects of market volatilities on Clover Power and Earth Tech 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 Clover Power with a short position of Earth Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clover Power and Earth Tech.

Diversification Opportunities for Clover Power and Earth Tech

0.36

Correlation Coefficient

Clover Power  Earth Tech

Weak diversification

The 3 months correlation between Clover and Earth is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Clover Power PCL and Earth Tech Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earth Tech Environment and Clover 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 Clover Power PCL are associated (or correlated) with Earth Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earth Tech Environment has no effect on the direction of Clover Power i.e., Clover Power and Earth Tech go up and down completely randomly.

Pair Corralation between Clover Power and Earth Tech

Assuming the 90 days horizon Clover Power is expected to generate 1.14 times less return on investment than Earth Tech. In addition to that, Clover Power is 1.0 times more volatile than Earth Tech Environment. It trades about 0.03 of its total potential returns per unit of risk. Earth Tech Environment is currently generating about 0.04 per unit of volatility. If you would invest  452.00  in Earth Tech Environment on October 23, 2024 and sell it today you would lose (298.00) from holding Earth Tech Environment or give up 65.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Clover Power PCL  vs.  Earth Tech Environment

Clover Power PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clover Power PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Earth Tech Environment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Earth Tech Environment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Clover Power and Earth Tech

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

The idea behind Clover Power PCL and Earth Tech Environment 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.