Correlation Between Rand Capital and CVW CleanTech

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

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

Diversification Opportunities for Rand Capital and CVW CleanTech

-0.56

Correlation Coefficient

Rand Capital  CVW CleanTech

Excellent diversification

The 3 months correlation between Rand and CVW is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Rand Capital Corp and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech and Rand Capital 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 Rand Capital Corp 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 Rand Capital i.e., Rand Capital and CVW CleanTech go up and down completely randomly.

Pair Corralation between Rand Capital and CVW CleanTech

Given the investment horizon of 90 days Rand Capital Corp is expected to generate 0.66 times more return on investment than CVW CleanTech. However, Rand Capital Corp is 1.51 times less risky than CVW CleanTech. It trades about 0.23 of its potential returns per unit of risk. CVW CleanTech is currently generating about 0.0 per unit of risk. If you would invest  1,327  in Rand Capital Corp on December 2, 2024 and sell it today you would earn a total of  918.00  from holding Rand Capital Corp or generate 69.18% return on investment over 90 days.

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

Rand Capital Corp  vs.  CVW CleanTech

Rand Capital Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rand Capital Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rand Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

CVW CleanTech

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rand Capital and CVW CleanTech

The main advantage of trading using opposite Rand Capital and CVW CleanTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rand Capital 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 Rand Capital Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.