Correlation Between Verde Clean and Dana

Can any of the company-specific risk be diversified away by investing in both Verde Clean and Dana 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 Dana 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 Dana Inc, you can compare the effects of market volatilities on Verde Clean and Dana 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 Dana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verde Clean and Dana.

Diversification Opportunities for Verde Clean and Dana

-0.11

Correlation Coefficient

Verde Clean  Dana

Good diversification

The 3 months correlation between Verde and Dana is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Verde Clean Fuels and Dana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Inc 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 Dana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Inc has no effect on the direction of Verde Clean i.e., Verde Clean and Dana go up and down completely randomly.

Pair Corralation between Verde Clean and Dana

Given the investment horizon of 90 days Verde Clean is expected to generate 4.95 times less return on investment than Dana. But when comparing it to its historical volatility, Verde Clean Fuels is 1.02 times less risky than Dana. It trades about 0.03 of its potential returns per unit of risk. Dana Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,156  in Dana Inc on December 18, 2024 and sell it today you would earn a total of  291.00  from holding Dana Inc or generate 25.17% return on investment over 90 days.

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

Verde Clean Fuels  vs.  Dana Inc

Verde Clean Fuels

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Verde Clean Fuels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Verde Clean is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Dana Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verde Clean and Dana

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

The idea behind Verde Clean Fuels and Dana Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.