Correlation Between Stem and Clearway Energy

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

By analyzing existing cross correlation between Stem Inc and Clearway Energy Class, you can compare the effects of market volatilities on Stem and Clearway 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 Stem with a short position of Clearway Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stem and Clearway Energy.

Diversification Opportunities for Stem and Clearway Energy

-0.54

Correlation Coefficient

Stem  Clearway Energy

Excellent diversification

The 3 months correlation between Stem and Clearway is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Clearway Energy Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy Class and Stem 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 Stem Inc are associated (or correlated) with Clearway Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearway Energy Class has no effect on the direction of Stem i.e., Stem and Clearway Energy go up and down completely randomly.

Pair Corralation between Stem and Clearway Energy

Given the investment horizon of 90 days Stem Inc is expected to under-perform the Clearway Energy. In addition to that, Stem is 7.75 times more volatile than Clearway Energy Class. It trades about -0.03 of its total potential returns per unit of risk. Clearway Energy Class is currently generating about 0.17 per unit of volatility. If you would invest  2,575  in Clearway Energy Class on December 29, 2024 and sell it today you would earn a total of  432.00  from holding Clearway Energy Class or generate 16.78% return on investment over 90 days.

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

Stem Inc  vs.  Clearway Energy Class

Stem Inc

Risk-Adjusted Performance

Very Weak

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

Clearway Energy Class

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy Class are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Clearway Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stem and Clearway Energy

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

The idea behind Stem Inc and Clearway Energy Class 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.