Correlation Between Reinsurance Group and CLEAN ENERGY

Can any of the company-specific risk be diversified away by investing in both Reinsurance Group and CLEAN ENERGY 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 Reinsurance Group and CLEAN ENERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reinsurance Group of and CLEAN ENERGY FUELS, you can compare the effects of market volatilities on Reinsurance Group and CLEAN ENERGY 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 Reinsurance Group with a short position of CLEAN ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and CLEAN ENERGY.

Diversification Opportunities for Reinsurance Group and CLEAN ENERGY

0.8

Correlation Coefficient

Reinsurance Group  CLEAN ENERGY

Very poor diversification

The 3 months correlation between Reinsurance and CLEAN is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and CLEAN ENERGY FUELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLEAN ENERGY FUELS and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with CLEAN ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLEAN ENERGY FUELS has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and CLEAN ENERGY go up and down completely randomly.

Pair Corralation between Reinsurance Group and CLEAN ENERGY

Assuming the 90 days trading horizon Reinsurance Group of is expected to generate 0.44 times more return on investment than CLEAN ENERGY. However, Reinsurance Group of is 2.28 times less risky than CLEAN ENERGY. It trades about -0.08 of its potential returns per unit of risk. CLEAN ENERGY FUELS is currently generating about -0.13 per unit of risk. If you would invest  19,714  in Reinsurance Group of on December 22, 2024 and sell it today you would lose (2,114) from holding Reinsurance Group of or give up 10.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Reinsurance Group of  vs.  CLEAN ENERGY FUELS

Reinsurance Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reinsurance Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CLEAN ENERGY FUELS

Risk-Adjusted Performance

Very Weak

Over the last 90 days CLEAN ENERGY FUELS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Reinsurance Group and CLEAN ENERGY

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

The idea behind Reinsurance Group of and CLEAN ENERGY FUELS 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 Global Correlations module to find global opportunities by holding instruments from different markets.