Correlation Between Strategic Investments and Clean Energy

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

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

Diversification Opportunities for Strategic Investments and Clean Energy

-0.09

Correlation Coefficient

Strategic Investments  Clean Energy

Good diversification

The 3 months correlation between Strategic and Clean is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS and Clean Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Fuels and Strategic Investments 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 Strategic Investments AS are associated (or correlated) with Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Fuels has no effect on the direction of Strategic Investments i.e., Strategic Investments and Clean Energy go up and down completely randomly.

Pair Corralation between Strategic Investments and Clean Energy

Assuming the 90 days horizon Strategic Investments AS is expected to under-perform the Clean Energy. In addition to that, Strategic Investments is 1.51 times more volatile than Clean Energy Fuels. It trades about -0.09 of its total potential returns per unit of risk. Clean Energy Fuels is currently generating about 0.04 per unit of volatility. If you would invest  267.00  in Clean Energy Fuels on October 7, 2024 and sell it today you would earn a total of  12.00  from holding Clean Energy Fuels or generate 4.49% return on investment over 90 days.

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

Strategic Investments AS  vs.  Clean Energy Fuels

Strategic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Investments AS 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.

Clean Energy Fuels

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Energy Fuels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Clean Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Strategic Investments and Clean Energy

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

The idea behind Strategic Investments AS and Clean Energy 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.