Correlation Between CO2 Energy and Aldel Financial

Can any of the company-specific risk be diversified away by investing in both CO2 Energy and Aldel Financial 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 CO2 Energy and Aldel Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CO2 Energy Transition and Aldel Financial II, you can compare the effects of market volatilities on CO2 Energy and Aldel Financial 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 CO2 Energy with a short position of Aldel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CO2 Energy and Aldel Financial.

Diversification Opportunities for CO2 Energy and Aldel Financial

-0.47

Correlation Coefficient

CO2 Energy  Aldel Financial

Very good diversification

The 3 months correlation between CO2 and Aldel is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding CO2 Energy Transition and Aldel Financial II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldel Financial II and CO2 Energy 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 CO2 Energy Transition are associated (or correlated) with Aldel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldel Financial II has no effect on the direction of CO2 Energy i.e., CO2 Energy and Aldel Financial go up and down completely randomly.

Pair Corralation between CO2 Energy and Aldel Financial

Assuming the 90 days horizon CO2 Energy is expected to generate 155.07 times less return on investment than Aldel Financial. But when comparing it to its historical volatility, CO2 Energy Transition is 45.18 times less risky than Aldel Financial. It trades about 0.14 of its potential returns per unit of risk. Aldel Financial II is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Aldel Financial II on October 10, 2024 and sell it today you would earn a total of  10.00  from holding Aldel Financial II or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.0%
Values	Daily Returns

CO2 Energy Transition  vs.  Aldel Financial II

CO2 Energy Transition

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CO2 Energy Transition are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, CO2 Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Aldel Financial II

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Aldel Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CO2 Energy and Aldel Financial

The main advantage of trading using opposite CO2 Energy and Aldel Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CO2 Energy position performs unexpectedly, Aldel Financial 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 Aldel Financial will offset losses from the drop in Aldel Financial's long position.

The idea behind CO2 Energy Transition and Aldel Financial II 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.