Correlation Between Origin Materials and CVW CleanTech

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

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

Diversification Opportunities for Origin Materials and CVW CleanTech

0.32

Correlation Coefficient

Origin Materials  CVW CleanTech

Weak diversification

The 3 months correlation between Origin and CVW is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Origin Materials and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech and Origin Materials 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 Origin Materials are associated (or correlated) with CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Origin Materials i.e., Origin Materials and CVW CleanTech go up and down completely randomly.

Pair Corralation between Origin Materials and CVW CleanTech

Given the investment horizon of 90 days Origin Materials is expected to generate 1.73 times more return on investment than CVW CleanTech. However, Origin Materials is 1.73 times more volatile than CVW CleanTech. It trades about 0.06 of its potential returns per unit of risk. CVW CleanTech is currently generating about -0.02 per unit of risk. If you would invest  83.00  in Origin Materials on September 27, 2024 and sell it today you would earn a total of  22.00  from holding Origin Materials or generate 26.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Origin Materials  vs.  CVW CleanTech

Origin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

CVW CleanTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVW CleanTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Origin Materials and CVW CleanTech

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

The idea behind Origin Materials and CVW CleanTech 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.