Correlation Between CVW CLEANTECH and Rolls Royce

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

By analyzing existing cross correlation between CVW CLEANTECH INC and Rolls Royce Holdings plc, you can compare the effects of market volatilities on CVW CLEANTECH and Rolls Royce 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 CVW CLEANTECH with a short position of Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVW CLEANTECH and Rolls Royce.

Diversification Opportunities for CVW CLEANTECH and Rolls Royce

0.42

Correlation Coefficient

CVW CLEANTECH  Rolls Royce

Very weak diversification

The 3 months correlation between CVW and Rolls is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding CVW CLEANTECH INC and Rolls Royce Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce Holdings and CVW CLEANTECH 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 CVW CLEANTECH INC are associated (or correlated) with Rolls Royce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rolls Royce Holdings has no effect on the direction of CVW CLEANTECH i.e., CVW CLEANTECH and Rolls Royce go up and down completely randomly.

Pair Corralation between CVW CLEANTECH and Rolls Royce

Assuming the 90 days trading horizon CVW CLEANTECH INC is expected to under-perform the Rolls Royce. In addition to that, CVW CLEANTECH is 2.36 times more volatile than Rolls Royce Holdings plc. It trades about -0.06 of its total potential returns per unit of risk. Rolls Royce Holdings plc is currently generating about 0.0 per unit of volatility. If you would invest  719.00  in Rolls Royce Holdings plc on October 6, 2024 and sell it today you would lose (2.00) from holding Rolls Royce Holdings plc or give up 0.28% of portfolio value over 90 days.

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

CVW CLEANTECH INC  vs.  Rolls Royce Holdings plc

CVW CLEANTECH INC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CLEANTECH INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable 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.

Rolls Royce Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Rolls Royce reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVW CLEANTECH and Rolls Royce

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

The idea behind CVW CLEANTECH INC and Rolls Royce Holdings plc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.