Correlation Between CLEAN ENERGY and Align Technology

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

By analyzing existing cross correlation between CLEAN ENERGY FUELS and Align Technology, you can compare the effects of market volatilities on CLEAN ENERGY and Align Technology 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 CLEAN ENERGY with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CLEAN ENERGY and Align Technology.

Diversification Opportunities for CLEAN ENERGY and Align Technology

0.08

Correlation Coefficient

CLEAN ENERGY  Align Technology

Significant diversification

The 3 months correlation between CLEAN and Align is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CLEAN ENERGY FUELS and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and CLEAN ENERGY 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 CLEAN ENERGY FUELS are associated (or correlated) with Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of CLEAN ENERGY i.e., CLEAN ENERGY and Align Technology go up and down completely randomly.

Pair Corralation between CLEAN ENERGY and Align Technology

Assuming the 90 days trading horizon CLEAN ENERGY FUELS is expected to generate 1.25 times more return on investment than Align Technology. However, CLEAN ENERGY is 1.25 times more volatile than Align Technology. It trades about 0.0 of its potential returns per unit of risk. Align Technology is currently generating about -0.01 per unit of risk. If you would invest  380.00  in CLEAN ENERGY FUELS on October 24, 2024 and sell it today you would lose (101.00) from holding CLEAN ENERGY FUELS or give up 26.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.76%
Values	Daily Returns

CLEAN ENERGY FUELS  vs.  Align Technology

CLEAN ENERGY FUELS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CLEAN ENERGY FUELS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CLEAN ENERGY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Align Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Align Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CLEAN ENERGY and Align Technology

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

The idea behind CLEAN ENERGY FUELS and Align Technology 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.