Correlation Between Environmental Clean and EROAD

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

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

Diversification Opportunities for Environmental Clean and EROAD

0.21

Correlation Coefficient

Environmental Clean  EROAD

Modest diversification

The 3 months correlation between Environmental and EROAD is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Environmental Clean Technologi and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD and Environmental Clean 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 Environmental Clean Technologies are associated (or correlated) with EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Environmental Clean i.e., Environmental Clean and EROAD go up and down completely randomly.

Pair Corralation between Environmental Clean and EROAD

Assuming the 90 days trading horizon Environmental Clean Technologies is expected to generate 2.49 times more return on investment than EROAD. However, Environmental Clean is 2.49 times more volatile than EROAD. It trades about 0.12 of its potential returns per unit of risk. EROAD is currently generating about -0.13 per unit of risk. If you would invest  0.20  in Environmental Clean Technologies on September 19, 2024 and sell it today you would earn a total of  0.10  from holding Environmental Clean Technologies or generate 50.0% return on investment over 90 days.

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

Environmental Clean Technologi  vs.  EROAD

Environmental Clean

Risk-Adjusted Performance

9 of 100

Weak

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

EROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Environmental Clean and EROAD

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

The idea behind Environmental Clean Technologies and EROAD 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.