Correlation Between Energy Absolute and Absolute Clean

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

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

Diversification Opportunities for Energy Absolute and Absolute Clean

0.55

Correlation Coefficient

Energy Absolute  Absolute Clean

Very weak diversification

The 3 months correlation between Energy and Absolute is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Energy Absolute Public and Absolute Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Clean Energy and Energy Absolute 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 Energy Absolute Public are associated (or correlated) with Absolute Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Clean Energy has no effect on the direction of Energy Absolute i.e., Energy Absolute and Absolute Clean go up and down completely randomly.

Pair Corralation between Energy Absolute and Absolute Clean

Assuming the 90 days horizon Energy Absolute Public is expected to under-perform the Absolute Clean. But the stock apears to be less risky and, when comparing its historical volatility, Energy Absolute Public is 9.71 times less risky than Absolute Clean. The stock trades about -0.1 of its potential returns per unit of risk. The Absolute Clean Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  188.00  in Absolute Clean Energy on September 12, 2024 and sell it today you would lose (56.00) from holding Absolute Clean Energy or give up 29.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.71%
Values	Daily Returns

Energy Absolute Public  vs.  Absolute Clean Energy

Energy Absolute Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Absolute Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Absolute Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Energy Absolute and Absolute Clean

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

The idea behind Energy Absolute Public and Absolute Clean 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.