Correlation Between CVW CleanTech and Ark Restaurants

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

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

Diversification Opportunities for CVW CleanTech and Ark Restaurants

0.36

Correlation Coefficient

CVW CleanTech  Ark Restaurants

Weak diversification

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

Pair Corralation between CVW CleanTech and Ark Restaurants

Assuming the 90 days horizon CVW CleanTech is expected to generate 0.77 times more return on investment than Ark Restaurants. However, CVW CleanTech is 1.3 times less risky than Ark Restaurants. It trades about -0.03 of its potential returns per unit of risk. Ark Restaurants Corp is currently generating about -0.03 per unit of risk. If you would invest  73.00  in CVW CleanTech on September 21, 2024 and sell it today you would lose (11.00) from holding CVW CleanTech or give up 15.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.07%
Values	Daily Returns

CVW CleanTech  vs.  Ark Restaurants Corp

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. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Ark Restaurants Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ark Restaurants Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Ark Restaurants is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CVW CleanTech and Ark Restaurants

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

The idea behind CVW CleanTech and Ark Restaurants Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.