Correlation Between Carnegie Clean and Westbridge Energy

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

By analyzing existing cross correlation between Carnegie Clean Energy and Westbridge Energy, you can compare the effects of market volatilities on Carnegie Clean and Westbridge 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 Carnegie Clean with a short position of Westbridge Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnegie Clean and Westbridge Energy.

Diversification Opportunities for Carnegie Clean and Westbridge Energy

0.18

Correlation Coefficient

Carnegie Clean  Westbridge Energy

Average diversification

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

Pair Corralation between Carnegie Clean and Westbridge Energy

Assuming the 90 days horizon Carnegie Clean Energy is expected to generate 23.45 times more return on investment than Westbridge Energy. However, Carnegie Clean is 23.45 times more volatile than Westbridge Energy. It trades about 0.18 of its potential returns per unit of risk. Westbridge Energy is currently generating about -0.2 per unit of risk. If you would invest  1.81  in Carnegie Clean Energy on October 25, 2024 and sell it today you would earn a total of  0.63  from holding Carnegie Clean Energy or generate 34.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Carnegie Clean Energy  vs.  Westbridge Energy

Carnegie Clean Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carnegie Clean Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Carnegie Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Westbridge Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westbridge Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Carnegie Clean and Westbridge Energy

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

The idea behind Carnegie Clean Energy and Westbridge 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.