Correlation Between Viridien and CMG Cleantech

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

By analyzing existing cross correlation between Viridien and CMG Cleantech SA, you can compare the effects of market volatilities on Viridien and CMG Cleantech 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 Viridien with a short position of CMG Cleantech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viridien and CMG Cleantech.

Diversification Opportunities for Viridien and CMG Cleantech

0.23

Correlation Coefficient

Viridien  CMG Cleantech

Modest diversification

The 3 months correlation between Viridien and CMG is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Viridien and CMG Cleantech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMG Cleantech SA and Viridien 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 Viridien are associated (or correlated) with CMG Cleantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMG Cleantech SA has no effect on the direction of Viridien i.e., Viridien and CMG Cleantech go up and down completely randomly.

Pair Corralation between Viridien and CMG Cleantech

Assuming the 90 days trading horizon Viridien is expected to generate 26.75 times more return on investment than CMG Cleantech. However, Viridien is 26.75 times more volatile than CMG Cleantech SA. It trades about 0.08 of its potential returns per unit of risk. CMG Cleantech SA is currently generating about 0.13 per unit of risk. If you would invest  4,997  in Viridien on September 15, 2024 and sell it today you would lose (316.00) from holding Viridien or give up 6.32% of portfolio value over 90 days.

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

Viridien  vs.  CMG Cleantech SA

Viridien

Risk-Adjusted Performance

10 of 100

OK

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

CMG Cleantech SA

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Viridien and CMG Cleantech

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

The idea behind Viridien and CMG Cleantech SA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.