Correlation Between Energy and LiqTech International

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

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

Diversification Opportunities for Energy and LiqTech International

0.59

Correlation Coefficient

Energy  LiqTech International

Very weak diversification

The 3 months correlation between Energy and LiqTech is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Water and LiqTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiqTech International and Energy 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 and Water are associated (or correlated) with LiqTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiqTech International has no effect on the direction of Energy i.e., Energy and LiqTech International go up and down completely randomly.

Pair Corralation between Energy and LiqTech International

Given the investment horizon of 90 days Energy and Water is expected to generate 4.01 times more return on investment than LiqTech International. However, Energy is 4.01 times more volatile than LiqTech International. It trades about 0.01 of its potential returns per unit of risk. LiqTech International is currently generating about -0.05 per unit of risk. If you would invest  0.38  in Energy and Water on December 29, 2024 and sell it today you would lose (0.16) from holding Energy and Water or give up 42.11% of portfolio value over 90 days.

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

Energy and Water  vs.  LiqTech International

Energy and Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy and Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

LiqTech International

Risk-Adjusted Performance

Very Weak

Over the last 90 days LiqTech International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Energy and LiqTech International

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

The idea behind Energy and Water and LiqTech International 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 Transaction History module to view history of all your transactions and understand their impact on performance.