Correlation Between CVW CleanTech and BLACK

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

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

Diversification Opportunities for CVW CleanTech and BLACK

-0.35

Correlation Coefficient

CVW CleanTech  BLACK

Very good diversification

The 3 months correlation between CVW and BLACK is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and BLACK HILLS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLACK HILLS P 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 BLACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLACK HILLS P has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and BLACK go up and down completely randomly.

Pair Corralation between CVW CleanTech and BLACK

Assuming the 90 days horizon CVW CleanTech is expected to generate 14.13 times more return on investment than BLACK. However, CVW CleanTech is 14.13 times more volatile than BLACK HILLS P. It trades about 0.01 of its potential returns per unit of risk. BLACK HILLS P is currently generating about -0.12 per unit of risk. If you would invest  65.00  in CVW CleanTech on December 23, 2024 and sell it today you would lose (4.00) from holding CVW CleanTech or give up 6.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.61%
Values	Daily Returns

CVW CleanTech  vs.  BLACK HILLS P

CVW CleanTech

Risk-Adjusted Performance

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

BLACK HILLS P

Risk-Adjusted Performance

Very Weak

Over the last 90 days BLACK HILLS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BLACK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CVW CleanTech and BLACK

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

The idea behind CVW CleanTech and BLACK HILLS P 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.