Correlation Between CVW CleanTech and Relief Therapeutics

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

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

Diversification Opportunities for CVW CleanTech and Relief Therapeutics

-0.41

Correlation Coefficient

CVW CleanTech  Relief Therapeutics

Very good diversification

The 3 months correlation between CVW and Relief is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Relief Therapeutics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relief Therapeutics 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 Relief Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relief Therapeutics has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Relief Therapeutics go up and down completely randomly.

Pair Corralation between CVW CleanTech and Relief Therapeutics

Assuming the 90 days horizon CVW CleanTech is expected to generate 86.14 times less return on investment than Relief Therapeutics. But when comparing it to its historical volatility, CVW CleanTech is 17.65 times less risky than Relief Therapeutics. It trades about 0.03 of its potential returns per unit of risk. Relief Therapeutics Holding is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1.90  in Relief Therapeutics Holding on September 20, 2024 and sell it today you would earn a total of  311.10  from holding Relief Therapeutics Holding or generate 16373.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	8.69%
Values	Daily Returns

CVW CleanTech  vs.  Relief Therapeutics Holding

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.

Relief Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relief Therapeutics Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Relief Therapeutics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CVW CleanTech and Relief Therapeutics

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

The idea behind CVW CleanTech and Relief Therapeutics Holding 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.