Correlation Between Verde Clean and Renew Energy

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

Diversification Opportunities for Verde Clean and Renew Energy

-0.31

Correlation Coefficient

Verde Clean  Renew Energy

Very good diversification

The 3 months correlation between Verde and Renew is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Verde Clean Fuels and Renew Energy Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renew Energy Global 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 Renew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renew Energy Global has no effect on the direction of Verde Clean i.e., Verde Clean and Renew Energy go up and down completely randomly.

Pair Corralation between Verde Clean and Renew Energy

Assuming the 90 days horizon Verde Clean Fuels is expected to generate 5.64 times more return on investment than Renew Energy. However, Verde Clean is 5.64 times more volatile than Renew Energy Global. It trades about 0.04 of its potential returns per unit of risk. Renew Energy Global is currently generating about -0.09 per unit of risk. If you would invest  29.00  in Verde Clean Fuels on December 27, 2024 and sell it today you would lose (1.00) from holding Verde Clean Fuels or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

Verde Clean Fuels  vs.  Renew Energy Global

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 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Verde Clean showed solid returns over the last few months and may actually be approaching a breakup point.

Renew Energy Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Renew Energy Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Verde Clean and Renew Energy

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

The idea behind Verde Clean Fuels and Renew Energy Global 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.