Correlation Between CVW CleanTech and Themac Resources

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

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

Diversification Opportunities for CVW CleanTech and Themac Resources

-0.57

Correlation Coefficient

CVW CleanTech  Themac Resources

Excellent diversification

The 3 months correlation between CVW and Themac is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Themac Resources Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themac Resources 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 Themac Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themac Resources has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Themac Resources go up and down completely randomly.

Pair Corralation between CVW CleanTech and Themac Resources

Assuming the 90 days horizon CVW CleanTech is expected to under-perform the Themac Resources. But the stock apears to be less risky and, when comparing its historical volatility, CVW CleanTech is 7.92 times less risky than Themac Resources. The stock trades about -0.03 of its potential returns per unit of risk. The Themac Resources Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Themac Resources Group on December 28, 2024 and sell it today you would earn a total of  3.50  from holding Themac Resources Group or generate 100.0% return on investment over 90 days.

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

CVW CleanTech  vs.  Themac Resources Group

CVW CleanTech

Risk-Adjusted Performance

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.

Themac Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Themac Resources Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Themac Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVW CleanTech and Themac Resources

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

The idea behind CVW CleanTech and Themac Resources Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..