Correlation Between Destination and CVW CleanTech

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

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

Diversification Opportunities for Destination and CVW CleanTech

0.3

Correlation Coefficient

Destination  CVW CleanTech

Weak diversification

The 3 months correlation between Destination and CVW is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech and Destination 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 Destination XL Group are associated (or correlated) with CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Destination i.e., Destination and CVW CleanTech go up and down completely randomly.

Pair Corralation between Destination and CVW CleanTech

Given the investment horizon of 90 days Destination XL Group is expected to under-perform the CVW CleanTech. But the stock apears to be less risky and, when comparing its historical volatility, Destination XL Group is 1.83 times less risky than CVW CleanTech. The stock trades about -0.18 of its potential returns per unit of risk. The CVW CleanTech is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  65.00  in CVW CleanTech on December 22, 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Destination XL Group  vs.  CVW CleanTech

Destination XL Group

Risk-Adjusted Performance

Very Weak

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

CVW CleanTech

Risk-Adjusted Performance

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

Pair Trading with Destination and CVW CleanTech

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

The idea behind Destination XL Group and CVW CleanTech 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.