Correlation Between CLEAN ENERGY and OracleJapan

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

Diversification Opportunities for CLEAN ENERGY and OracleJapan

0.25

Correlation Coefficient

CLEAN ENERGY  OracleJapan

Modest diversification

The 3 months correlation between CLEAN and OracleJapan is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding CLEAN ENERGY FUELS and Oracle Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle Japan 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 OracleJapan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle Japan has no effect on the direction of CLEAN ENERGY i.e., CLEAN ENERGY and OracleJapan go up and down completely randomly.

Pair Corralation between CLEAN ENERGY and OracleJapan

Assuming the 90 days trading horizon CLEAN ENERGY FUELS is expected to under-perform the OracleJapan. In addition to that, CLEAN ENERGY is 2.39 times more volatile than Oracle Japan. It trades about -0.13 of its total potential returns per unit of risk. Oracle Japan is currently generating about 0.01 per unit of volatility. If you would invest  8,750  in Oracle Japan on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Oracle Japan or generate 0.0% return on investment over 90 days.

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

CLEAN ENERGY FUELS  vs.  Oracle Japan

CLEAN ENERGY FUELS

Risk-Adjusted Performance

Very Weak

Over the last 90 days CLEAN ENERGY FUELS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Oracle Japan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oracle Japan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, OracleJapan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CLEAN ENERGY and OracleJapan

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

The idea behind CLEAN ENERGY FUELS and Oracle Japan 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.