Correlation Between CVW CleanTech and Cars

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

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

Diversification Opportunities for CVW CleanTech and Cars

0.18

Correlation Coefficient

CVW CleanTech  Cars

Average diversification

The 3 months correlation between CVW and Cars is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Cars go up and down completely randomly.

Pair Corralation between CVW CleanTech and Cars

Assuming the 90 days horizon CVW CleanTech is expected to generate 1.34 times more return on investment than Cars. However, CVW CleanTech is 1.34 times more volatile than Cars Inc. It trades about 0.05 of its potential returns per unit of risk. Cars Inc is currently generating about -0.03 per unit of risk. If you would invest  57.00  in CVW CleanTech on October 25, 2024 and sell it today you would earn a total of  1.00  from holding CVW CleanTech or generate 1.75% return on investment over 90 days.

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

CVW CleanTech  vs.  Cars Inc

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.

Cars Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Cars may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CVW CleanTech and Cars

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

The idea behind CVW CleanTech and Cars 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.