Correlation Between North American and ALERION CLEANPOWER

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

By analyzing existing cross correlation between North American Construction and ALERION CLEANPOWER, you can compare the effects of market volatilities on North American and ALERION CLEANPOWER 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 North American with a short position of ALERION CLEANPOWER. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and ALERION CLEANPOWER.

Diversification Opportunities for North American and ALERION CLEANPOWER

0.43

Correlation Coefficient

North American  ALERION CLEANPOWER

Very weak diversification

The 3 months correlation between North and ALERION is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and ALERION CLEANPOWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALERION CLEANPOWER and North American 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 North American Construction are associated (or correlated) with ALERION CLEANPOWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALERION CLEANPOWER has no effect on the direction of North American i.e., North American and ALERION CLEANPOWER go up and down completely randomly.

Pair Corralation between North American and ALERION CLEANPOWER

Assuming the 90 days horizon North American Construction is expected to generate 1.24 times more return on investment than ALERION CLEANPOWER. However, North American is 1.24 times more volatile than ALERION CLEANPOWER. It trades about 0.05 of its potential returns per unit of risk. ALERION CLEANPOWER is currently generating about -0.04 per unit of risk. If you would invest  1,224  in North American Construction on October 5, 2024 and sell it today you would earn a total of  776.00  from holding North American Construction or generate 63.4% return on investment over 90 days.

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

North American Construction  vs.  ALERION CLEANPOWER

North American Const

Risk-Adjusted Performance

0 of 100

OK

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

ALERION CLEANPOWER

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with North American and ALERION CLEANPOWER

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

The idea behind North American Construction and ALERION CLEANPOWER 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.