Correlation Between Verde Clean and Clearway Energy

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Can any of the company-specific risk be diversified away by investing in both Verde Clean 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 Verde Clean and Clearway Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verde Clean Fuels and Clearway Energy Class, you can compare the effects of market volatilities on Verde Clean 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 Verde Clean with a short position of Clearway Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verde Clean and Clearway Energy.

Diversification Opportunities for Verde Clean and Clearway Energy

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between Verde and Clearway is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Verde Clean Fuels 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 Verde Clean 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 Verde Clean Fuels 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 Verde Clean i.e., Verde Clean and Clearway Energy go up and down completely randomly.

Pair Corralation between Verde Clean and Clearway Energy

Given the investment horizon of 90 days Verde Clean Fuels is expected to under-perform the Clearway Energy. In addition to that, Verde Clean is 1.43 times more volatile than Clearway Energy Class. It trades about -0.01 of its total potential returns per unit of risk. Clearway Energy Class is currently generating about 0.01 per unit of volatility. If you would invest  2,837  in Clearway Energy Class on September 6, 2024 and sell it today you would earn a total of  0.00  from holding Clearway Energy Class or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Verde Clean Fuels  vs.  Clearway Energy Class

 Performance 
       Timeline  
Verde Clean Fuels 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Verde Clean Fuels are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Verde Clean may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Clearway Energy Class 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy Class are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Clearway Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Verde Clean and Clearway Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verde Clean and Clearway Energy

The main advantage of trading using opposite Verde Clean and Clearway Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verde Clean 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 Verde Clean Fuels 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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