Correlation Between CVW CleanTech and Information Services

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

By analyzing existing cross correlation between CVW CleanTech and Information Services, you can compare the effects of market volatilities on CVW CleanTech and Information Services 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 Information Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVW CleanTech and Information Services.

Diversification Opportunities for CVW CleanTech and Information Services

-0.39

Correlation Coefficient

CVW CleanTech  Information Services

Very good diversification

The 3 months correlation between CVW and Information is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Information Services go up and down completely randomly.

Pair Corralation between CVW CleanTech and Information Services

Assuming the 90 days horizon CVW CleanTech is expected to generate 2.52 times more return on investment than Information Services. However, CVW CleanTech is 2.52 times more volatile than Information Services. It trades about 0.04 of its potential returns per unit of risk. Information Services is currently generating about 0.02 per unit of risk. If you would invest  75.00  in CVW CleanTech on October 9, 2024 and sell it today you would earn a total of  14.00  from holding CVW CleanTech or generate 18.67% return on investment over 90 days.

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

CVW CleanTech  vs.  Information Services

CVW CleanTech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CVW CleanTech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Information Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Information Services is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CVW CleanTech and Information Services

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

The idea behind CVW CleanTech and Information Services 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.