Correlation Between Earth Tech and CK Power

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

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

Diversification Opportunities for Earth Tech and CK Power

0.83

Correlation Coefficient

Earth Tech  CK Power

Very poor diversification

The 3 months correlation between Earth and CKP is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Earth Tech Environment and CK Power Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CK Power Public and Earth Tech 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 Earth Tech Environment are associated (or correlated) with CK Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CK Power Public has no effect on the direction of Earth Tech i.e., Earth Tech and CK Power go up and down completely randomly.

Pair Corralation between Earth Tech and CK Power

Assuming the 90 days trading horizon Earth Tech Environment is expected to under-perform the CK Power. But the stock apears to be less risky and, when comparing its historical volatility, Earth Tech Environment is 1.05 times less risky than CK Power. The stock trades about -0.5 of its potential returns per unit of risk. The CK Power Public is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  322.00  in CK Power Public on October 8, 2024 and sell it today you would lose (8.00) from holding CK Power Public or give up 2.48% of portfolio value over 90 days.

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

Earth Tech Environment  vs.  CK Power Public

Earth Tech Environment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Earth Tech Environment 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 indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

CK Power Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CK Power 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 basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Earth Tech and CK Power

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

The idea behind Earth Tech Environment and CK Power Public 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.