Correlation Between Gevo and HydroGraph Clean

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

By analyzing existing cross correlation between Gevo Inc and HydroGraph Clean Power, you can compare the effects of market volatilities on Gevo and HydroGraph Clean 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 Gevo with a short position of HydroGraph Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gevo and HydroGraph Clean.

Diversification Opportunities for Gevo and HydroGraph Clean

-0.67

Correlation Coefficient

Gevo  HydroGraph Clean

Excellent diversification

The 3 months correlation between Gevo and HydroGraph is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gevo Inc and HydroGraph Clean Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HydroGraph Clean Power and Gevo 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 Gevo Inc are associated (or correlated) with HydroGraph Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HydroGraph Clean Power has no effect on the direction of Gevo i.e., Gevo and HydroGraph Clean go up and down completely randomly.

Pair Corralation between Gevo and HydroGraph Clean

Given the investment horizon of 90 days Gevo Inc is expected to generate 1.38 times more return on investment than HydroGraph Clean. However, Gevo is 1.38 times more volatile than HydroGraph Clean Power. It trades about 0.18 of its potential returns per unit of risk. HydroGraph Clean Power is currently generating about 0.06 per unit of risk. If you would invest  73.00  in Gevo Inc on September 2, 2024 and sell it today you would earn a total of  92.00  from holding Gevo Inc or generate 126.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	56.25%
Values	Daily Returns

Gevo Inc  vs.  HydroGraph Clean Power

Gevo Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gevo Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Gevo displayed solid returns over the last few months and may actually be approaching a breakup point.

HydroGraph Clean Power

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days HydroGraph Clean Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, HydroGraph Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gevo and HydroGraph Clean

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

The idea behind Gevo Inc and HydroGraph Clean Power 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.