Correlation Between CVW CleanTech and Talen Energy

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

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

Diversification Opportunities for CVW CleanTech and Talen Energy

0.16

Correlation Coefficient

CVW CleanTech  Talen Energy

Average diversification

The 3 months correlation between CVW and Talen is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Talen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talen Energy 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 Talen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talen Energy has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Talen Energy go up and down completely randomly.

Pair Corralation between CVW CleanTech and Talen Energy

Assuming the 90 days horizon CVW CleanTech is expected to under-perform the Talen Energy. In addition to that, CVW CleanTech is 1.74 times more volatile than Talen Energy. It trades about -0.04 of its total potential returns per unit of risk. Talen Energy is currently generating about 0.13 per unit of volatility. If you would invest  20,366  in Talen Energy on October 11, 2024 and sell it today you would earn a total of  1,193  from holding Talen Energy or generate 5.86% 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.  Talen Energy

CVW CleanTech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Talen Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Talen Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile essential indicators, Talen Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVW CleanTech and Talen Energy

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

The idea behind CVW CleanTech and Talen Energy 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.