Correlation Between Neo Battery and Cielo Waste

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

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

Diversification Opportunities for Neo Battery and Cielo Waste

0.65

Correlation Coefficient

Neo Battery  Cielo Waste

Poor diversification

The 3 months correlation between Neo and Cielo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Neo Battery Materials and Cielo Waste Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cielo Waste Solutions and Neo Battery 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 Neo Battery Materials are associated (or correlated) with Cielo Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cielo Waste Solutions has no effect on the direction of Neo Battery i.e., Neo Battery and Cielo Waste go up and down completely randomly.

Pair Corralation between Neo Battery and Cielo Waste

Assuming the 90 days horizon Neo Battery Materials is expected to generate 0.95 times more return on investment than Cielo Waste. However, Neo Battery Materials is 1.05 times less risky than Cielo Waste. It trades about 0.01 of its potential returns per unit of risk. Cielo Waste Solutions is currently generating about -0.02 per unit of risk. If you would invest  80.00  in Neo Battery Materials on December 28, 2024 and sell it today you would lose (2.00) from holding Neo Battery Materials or give up 2.5% of portfolio value over 90 days.

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

Neo Battery Materials  vs.  Cielo Waste Solutions

Neo Battery Materials

Risk-Adjusted Performance

Weak

Over the last 90 days Neo Battery Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Neo Battery is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cielo Waste Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cielo Waste Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cielo Waste is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Neo Battery and Cielo Waste

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

The idea behind Neo Battery Materials and Cielo Waste 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.