Correlation Between CVW CleanTech and Arq

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

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

Diversification Opportunities for CVW CleanTech and Arq

-0.02

Correlation Coefficient

CVW CleanTech  Arq

Good diversification

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

Pair Corralation between CVW CleanTech and Arq

Assuming the 90 days horizon CVW CleanTech is expected to generate 3.29 times less return on investment than Arq. But when comparing it to its historical volatility, CVW CleanTech is 1.18 times less risky than Arq. It trades about 0.05 of its potential returns per unit of risk. Arq Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  602.00  in Arq Inc on October 7, 2024 and sell it today you would earn a total of  134.00  from holding Arq Inc or generate 22.26% 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.  Arq Inc

CVW CleanTech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CVW CleanTech is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Arq Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arq Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Arq reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVW CleanTech and Arq

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

The idea behind CVW CleanTech and Arq Inc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.