Correlation Between Clean Energy and Nissan Chemical

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

Diversification Opportunities for Clean Energy and Nissan Chemical

0.12

Correlation Coefficient

Clean Energy  Nissan Chemical

Average diversification

The 3 months correlation between Clean and Nissan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and Nissan Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Chemical Corp 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 Nissan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Chemical Corp has no effect on the direction of Clean Energy i.e., Clean Energy and Nissan Chemical go up and down completely randomly.

Pair Corralation between Clean Energy and Nissan Chemical

Assuming the 90 days horizon Clean Energy Fuels is expected to generate 2.09 times more return on investment than Nissan Chemical. However, Clean Energy is 2.09 times more volatile than Nissan Chemical Corp. It trades about -0.01 of its potential returns per unit of risk. Nissan Chemical Corp is currently generating about -0.03 per unit of risk. If you would invest  503.00  in Clean Energy Fuels on October 11, 2024 and sell it today you would lose (211.00) from holding Clean Energy Fuels or give up 41.95% 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.  Nissan Chemical Corp

Clean Energy Fuels

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Energy Fuels are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Clean Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Nissan Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Clean Energy and Nissan Chemical

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

The idea behind Clean Energy Fuels and Nissan Chemical Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.