Correlation Between 5E Advanced and CN Energy

Can any of the company-specific risk be diversified away by investing in both 5E Advanced and CN Energy 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 5E Advanced and CN Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 5E Advanced Materials and CN Energy Group, you can compare the effects of market volatilities on 5E Advanced and CN Energy 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 5E Advanced with a short position of CN Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of 5E Advanced and CN Energy.

Diversification Opportunities for 5E Advanced and CN Energy

0.24

Correlation Coefficient

5E Advanced  CN Energy

Modest diversification

The 3 months correlation between FEAM and CNEY is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding 5E Advanced Materials and CN Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN Energy Group and 5E Advanced 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 5E Advanced Materials are associated (or correlated) with CN Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN Energy Group has no effect on the direction of 5E Advanced i.e., 5E Advanced and CN Energy go up and down completely randomly.

Pair Corralation between 5E Advanced and CN Energy

Given the investment horizon of 90 days 5E Advanced Materials is expected to generate 2.16 times more return on investment than CN Energy. However, 5E Advanced is 2.16 times more volatile than CN Energy Group. It trades about 0.09 of its potential returns per unit of risk. CN Energy Group is currently generating about 0.06 per unit of risk. If you would invest  45.00  in 5E Advanced Materials on October 20, 2024 and sell it today you would earn a total of  2.00  from holding 5E Advanced Materials or generate 4.44% return on investment over 90 days.

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

5E Advanced Materials  vs.  CN Energy Group

5E Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 5E Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, 5E Advanced may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CN Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CN Energy Group 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with 5E Advanced and CN Energy

The main advantage of trading using opposite 5E Advanced and CN Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 5E Advanced position performs unexpectedly, CN Energy 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 CN Energy will offset losses from the drop in CN Energy's long position.

The idea behind 5E Advanced Materials and CN Energy Group 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.