Correlation Between Montauk Renewables and Cleantech Power

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

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

Diversification Opportunities for Montauk Renewables and Cleantech Power

0.0

Correlation Coefficient

Montauk Renewables  Cleantech Power

Pay attention - limited upside

The 3 months correlation between Montauk and Cleantech is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Cleantech Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleantech Power Corp and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Cleantech Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleantech Power Corp has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Cleantech Power go up and down completely randomly.

Pair Corralation between Montauk Renewables and Cleantech Power

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Cleantech Power. But the stock apears to be less risky and, when comparing its historical volatility, Montauk Renewables is 16.88 times less risky than Cleantech Power. The stock trades about -0.06 of its potential returns per unit of risk. The Cleantech Power Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.34  in Cleantech Power Corp on September 21, 2024 and sell it today you would earn a total of  0.25  from holding Cleantech Power Corp or generate 73.53% return on investment over 90 days.

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

Montauk Renewables  vs.  Cleantech Power Corp

Montauk Renewables

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Cleantech Power Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Montauk Renewables and Cleantech Power

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

The idea behind Montauk Renewables and Cleantech Power Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.