Correlation Between Energy Recovery and Aker Carbon

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

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

Diversification Opportunities for Energy Recovery and Aker Carbon

0.26

Correlation Coefficient

Energy Recovery  Aker Carbon

Modest diversification

The 3 months correlation between Energy and Aker is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Energy Recovery and Aker Carbon Capture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Carbon Capture and Energy Recovery 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 Recovery are associated (or correlated) with Aker Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Carbon Capture has no effect on the direction of Energy Recovery i.e., Energy Recovery and Aker Carbon go up and down completely randomly.

Pair Corralation between Energy Recovery and Aker Carbon

Given the investment horizon of 90 days Energy Recovery is expected to under-perform the Aker Carbon. In addition to that, Energy Recovery is 1.0 times more volatile than Aker Carbon Capture. It trades about -0.01 of its total potential returns per unit of risk. Aker Carbon Capture is currently generating about -0.01 per unit of volatility. If you would invest  54.00  in Aker Carbon Capture on August 30, 2024 and sell it today you would lose (3.00) from holding Aker Carbon Capture or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Energy Recovery  vs.  Aker Carbon Capture

Energy Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Energy Recovery is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Aker Carbon Capture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aker Carbon Capture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Aker Carbon is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Energy Recovery and Aker Carbon

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

The idea behind Energy Recovery and Aker Carbon Capture 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.