Correlation Between Dana and Verde Clean

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

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

Diversification Opportunities for Dana and Verde Clean

-0.63

Correlation Coefficient

Dana  Verde Clean

Excellent diversification

The 3 months correlation between Dana and Verde is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Verde Clean Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verde Clean Fuels and Dana 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 Dana Inc are associated (or correlated) with Verde Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verde Clean Fuels has no effect on the direction of Dana i.e., Dana and Verde Clean go up and down completely randomly.

Pair Corralation between Dana and Verde Clean

Considering the 90-day investment horizon Dana Inc is expected to generate 1.27 times more return on investment than Verde Clean. However, Dana is 1.27 times more volatile than Verde Clean Fuels. It trades about 0.13 of its potential returns per unit of risk. Verde Clean Fuels is currently generating about -0.03 per unit of risk. If you would invest  1,018  in Dana Inc on October 24, 2024 and sell it today you would earn a total of  314.00  from holding Dana Inc or generate 30.84% return on investment over 90 days.

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

Dana Inc  vs.  Verde Clean Fuels

Dana Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

Verde Clean Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verde Clean Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Dana and Verde Clean

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

The idea behind Dana Inc and Verde Clean Fuels 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.