Correlation Between Enter Air and Clean Carbon

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

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

Diversification Opportunities for Enter Air and Clean Carbon

0.38

Correlation Coefficient

Enter Air  Clean Carbon

Weak diversification

The 3 months correlation between Enter and Clean is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Enter Air SA and Clean Carbon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Carbon Energy and Enter Air 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 Enter Air SA are associated (or correlated) with Clean Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Carbon Energy has no effect on the direction of Enter Air i.e., Enter Air and Clean Carbon go up and down completely randomly.

Pair Corralation between Enter Air and Clean Carbon

Assuming the 90 days trading horizon Enter Air SA is expected to under-perform the Clean Carbon. But the stock apears to be less risky and, when comparing its historical volatility, Enter Air SA is 5.04 times less risky than Clean Carbon. The stock trades about -0.02 of its potential returns per unit of risk. The Clean Carbon Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Clean Carbon Energy on December 2, 2024 and sell it today you would earn a total of  4.00  from holding Clean Carbon Energy or generate 13.79% return on investment over 90 days.

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

Enter Air SA  vs.  Clean Carbon Energy

Enter Air SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enter Air SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Enter Air is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Clean Carbon Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Carbon Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Clean Carbon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enter Air and Clean Carbon

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

The idea behind Enter Air SA and Clean Carbon 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.