Correlation Between Delta CleanTech and Energy

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

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

Diversification Opportunities for Delta CleanTech and Energy

0.46

Correlation Coefficient

Delta CleanTech  Energy

Very weak diversification

The 3 months correlation between Delta and Energy is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Delta CleanTech and Energy and Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy and Water and Delta 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 Delta CleanTech are associated (or correlated) with Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy and Water has no effect on the direction of Delta CleanTech i.e., Delta CleanTech and Energy go up and down completely randomly.

Pair Corralation between Delta CleanTech and Energy

Assuming the 90 days horizon Delta CleanTech is expected to generate 2.56 times more return on investment than Energy. However, Delta CleanTech is 2.56 times more volatile than Energy and Water. It trades about 0.19 of its potential returns per unit of risk. Energy and Water is currently generating about 0.1 per unit of risk. If you would invest  1.80  in Delta CleanTech on October 27, 2024 and sell it today you would earn a total of  1.49  from holding Delta CleanTech or generate 82.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Delta CleanTech  vs.  Energy and Water

Delta CleanTech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta CleanTech are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Delta CleanTech reported solid returns over the last few months and may actually be approaching a breakup point.

Energy and Water

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy and Water are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta CleanTech and Energy

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

The idea behind Delta CleanTech and Energy and Water 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.