Correlation Between Zurn Elkay and ClearSign Combustion

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

By analyzing existing cross correlation between Zurn Elkay Water and ClearSign Combustion, you can compare the effects of market volatilities on Zurn Elkay and ClearSign Combustion 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 Zurn Elkay with a short position of ClearSign Combustion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zurn Elkay and ClearSign Combustion.

Diversification Opportunities for Zurn Elkay and ClearSign Combustion

0.23

Correlation Coefficient

Zurn Elkay  ClearSign Combustion

Modest diversification

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

Pair Corralation between Zurn Elkay and ClearSign Combustion

Considering the 90-day investment horizon Zurn Elkay is expected to generate 9.35 times less return on investment than ClearSign Combustion. But when comparing it to its historical volatility, Zurn Elkay Water is 8.77 times less risky than ClearSign Combustion. It trades about 0.14 of its potential returns per unit of risk. ClearSign Combustion is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  111.00  in ClearSign Combustion on October 25, 2024 and sell it today you would earn a total of  23.00  from holding ClearSign Combustion or generate 20.72% return on investment over 90 days.

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

Zurn Elkay Water  vs.  ClearSign Combustion

Zurn Elkay Water

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zurn Elkay Water are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Zurn Elkay may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ClearSign Combustion

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ClearSign Combustion are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting forward indicators, ClearSign Combustion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zurn Elkay and ClearSign Combustion

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

The idea behind Zurn Elkay Water and ClearSign Combustion 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.