Correlation Between Federal Signal and CleanCore Solutions

Can any of the company-specific risk be diversified away by investing in both Federal Signal and CleanCore Solutions 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 Federal Signal and CleanCore Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Federal Signal and CleanCore Solutions

0.07

Correlation Coefficient

Federal Signal  CleanCore Solutions

Significant diversification

The 3 months correlation between Federal and CleanCore is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and CleanCore Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CleanCore Solutions and Federal Signal 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 Federal Signal are associated (or correlated) with CleanCore Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CleanCore Solutions has no effect on the direction of Federal Signal i.e., Federal Signal and CleanCore Solutions go up and down completely randomly.

Pair Corralation between Federal Signal and CleanCore Solutions

Considering the 90-day investment horizon Federal Signal is expected to generate 0.36 times more return on investment than CleanCore Solutions. However, Federal Signal is 2.77 times less risky than CleanCore Solutions. It trades about -0.1 of its potential returns per unit of risk. CleanCore Solutions is currently generating about -0.04 per unit of risk. If you would invest  9,202  in Federal Signal on December 29, 2024 and sell it today you would lose (1,314) from holding Federal Signal or give up 14.28% of portfolio value over 90 days.

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

Federal Signal  vs.  CleanCore Solutions

Federal Signal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Signal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CleanCore Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days CleanCore Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Federal Signal and CleanCore Solutions

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

The idea behind Federal Signal and CleanCore Solutions 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..