Correlation Between Clean Energy and ITALIAN WINE

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

Diversification Opportunities for Clean Energy and ITALIAN WINE

0.11

Correlation Coefficient

Clean Energy  ITALIAN WINE

Average diversification

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

Pair Corralation between Clean Energy and ITALIAN WINE

Assuming the 90 days horizon Clean Energy Fuels is expected to under-perform the ITALIAN WINE. In addition to that, Clean Energy is 2.28 times more volatile than ITALIAN WINE BRANDS. It trades about -0.13 of its total potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about 0.0 per unit of volatility. If you would invest  2,170  in ITALIAN WINE BRANDS on November 28, 2024 and sell it today you would lose (30.00) from holding ITALIAN WINE BRANDS or give up 1.38% of portfolio value over 90 days.

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

Clean Energy Fuels  vs.  ITALIAN WINE BRANDS

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. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ITALIAN WINE BRANDS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITALIAN WINE BRANDS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITALIAN WINE 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 ITALIAN WINE

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

The idea behind Clean Energy Fuels and ITALIAN WINE BRANDS 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.