Correlation Between Immobile and Clean Carbon

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

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

Diversification Opportunities for Immobile and Clean Carbon

0.29

Correlation Coefficient

Immobile  Clean Carbon

Modest diversification

The 3 months correlation between Immobile and Clean is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Immobile and Clean Carbon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Carbon Energy and Immobile 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 Immobile are associated (or correlated) with Clean Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Carbon Energy has no effect on the direction of Immobile i.e., Immobile and Clean Carbon go up and down completely randomly.

Pair Corralation between Immobile and Clean Carbon

Assuming the 90 days trading horizon Immobile is expected to generate 1.4 times less return on investment than Clean Carbon. But when comparing it to its historical volatility, Immobile is 2.18 times less risky than Clean Carbon. It trades about 0.14 of its potential returns per unit of risk. Clean Carbon Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Clean Carbon Energy on December 23, 2024 and sell it today you would earn a total of  6.00  from holding Clean Carbon Energy or generate 24.0% return on investment over 90 days.

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

Immobile  vs.  Clean Carbon Energy

Immobile

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Immobile are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Immobile reported solid returns over the last few months and may actually be approaching a breakup point.

Clean Carbon Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Carbon Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Clean Carbon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Immobile and Clean Carbon

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

The idea behind Immobile and Clean Carbon Energy 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.