Correlation Between ALERION CLEANPOWER and SCOTT TECHNOLOGY

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

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

Diversification Opportunities for ALERION CLEANPOWER and SCOTT TECHNOLOGY

0.49

Correlation Coefficient

ALERION CLEANPOWER  SCOTT TECHNOLOGY

Very weak diversification

The 3 months correlation between ALERION and SCOTT is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ALERION CLEANPOWER and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY and ALERION CLEANPOWER 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 ALERION CLEANPOWER are associated (or correlated) with SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of ALERION CLEANPOWER i.e., ALERION CLEANPOWER and SCOTT TECHNOLOGY go up and down completely randomly.

Pair Corralation between ALERION CLEANPOWER and SCOTT TECHNOLOGY

Assuming the 90 days trading horizon ALERION CLEANPOWER is expected to generate 3.34 times less return on investment than SCOTT TECHNOLOGY. But when comparing it to its historical volatility, ALERION CLEANPOWER is 1.23 times less risky than SCOTT TECHNOLOGY. It trades about 0.02 of its potential returns per unit of risk. SCOTT TECHNOLOGY is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  112.00  in SCOTT TECHNOLOGY on October 5, 2024 and sell it today you would earn a total of  9.00  from holding SCOTT TECHNOLOGY or generate 8.04% return on investment over 90 days.

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

ALERION CLEANPOWER  vs.  SCOTT TECHNOLOGY

ALERION CLEANPOWER

Risk-Adjusted Performance

0 of 100

Weak

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

SCOTT TECHNOLOGY

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days SCOTT TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain technical indicators, SCOTT TECHNOLOGY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ALERION CLEANPOWER and SCOTT TECHNOLOGY

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

The idea behind ALERION CLEANPOWER and SCOTT TECHNOLOGY 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.