Correlation Between CVW CleanTech and Fortis Pref

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

By analyzing existing cross correlation between CVW CleanTech and Fortis Pref M, you can compare the effects of market volatilities on CVW CleanTech and Fortis Pref 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 CVW CleanTech with a short position of Fortis Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVW CleanTech and Fortis Pref.

Diversification Opportunities for CVW CleanTech and Fortis Pref

-0.02

Correlation Coefficient

CVW CleanTech  Fortis Pref

Good diversification

The 3 months correlation between CVW and Fortis is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Fortis Pref M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Pref M and CVW CleanTech 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 CVW CleanTech are associated (or correlated) with Fortis Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Pref M has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Fortis Pref go up and down completely randomly.

Pair Corralation between CVW CleanTech and Fortis Pref

Assuming the 90 days horizon CVW CleanTech is expected to generate 5.84 times more return on investment than Fortis Pref. However, CVW CleanTech is 5.84 times more volatile than Fortis Pref M. It trades about 0.01 of its potential returns per unit of risk. Fortis Pref M is currently generating about 0.07 per unit of risk. If you would invest  98.00  in CVW CleanTech on October 23, 2024 and sell it today you would lose (15.00) from holding CVW CleanTech or give up 15.31% of portfolio value over 90 days.

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

CVW CleanTech  vs.  Fortis Pref M

CVW CleanTech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fortis Pref M

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Pref M are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fortis Pref is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CVW CleanTech and Fortis Pref

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

The idea behind CVW CleanTech and Fortis Pref M 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..