Correlation Between Urban One and ClearSign Combustion

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

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

Diversification Opportunities for Urban One and ClearSign Combustion

-0.41

Correlation Coefficient

Urban One  ClearSign Combustion

Very good diversification

The 3 months correlation between Urban and ClearSign is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Urban One Class and ClearSign Combustion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearSign Combustion and Urban One 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 Urban One Class are associated (or correlated) with ClearSign Combustion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearSign Combustion has no effect on the direction of Urban One i.e., Urban One and ClearSign Combustion go up and down completely randomly.

Pair Corralation between Urban One and ClearSign Combustion

Assuming the 90 days horizon Urban One Class is expected to under-perform the ClearSign Combustion. But the stock apears to be less risky and, when comparing its historical volatility, Urban One Class is 1.28 times less risky than ClearSign Combustion. The stock trades about -0.09 of its potential returns per unit of risk. The ClearSign Combustion is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  133.00  in ClearSign Combustion on September 12, 2024 and sell it today you would lose (17.00) from holding ClearSign Combustion or give up 12.78% of portfolio value over 90 days.

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

Urban One Class  vs.  ClearSign Combustion

Urban One Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Urban One Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Urban One is not utilizing all of its potentials. The new stock price mess, may contribute to short-term losses for the institutional investors.

ClearSign Combustion

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ClearSign Combustion are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting forward indicators, ClearSign Combustion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Urban One and ClearSign Combustion

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

The idea behind Urban One Class and ClearSign Combustion 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.