Correlation Between ECHO INVESTMENT and CLEAN ENERGY

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Can any of the company-specific risk be diversified away by investing in both ECHO INVESTMENT and CLEAN ENERGY 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 ECHO INVESTMENT and CLEAN ENERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECHO INVESTMENT ZY and CLEAN ENERGY FUELS, you can compare the effects of market volatilities on ECHO INVESTMENT and CLEAN ENERGY 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 ECHO INVESTMENT with a short position of CLEAN ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECHO INVESTMENT and CLEAN ENERGY.

Diversification Opportunities for ECHO INVESTMENT and CLEAN ENERGY

ECHOCLEANDiversified AwayECHOCLEANDiversified Away100%
-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between ECHO and CLEAN is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and CLEAN ENERGY FUELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLEAN ENERGY FUELS and ECHO INVESTMENT 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 ECHO INVESTMENT ZY are associated (or correlated) with CLEAN ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLEAN ENERGY FUELS has no effect on the direction of ECHO INVESTMENT i.e., ECHO INVESTMENT and CLEAN ENERGY go up and down completely randomly.

Pair Corralation between ECHO INVESTMENT and CLEAN ENERGY

Assuming the 90 days horizon ECHO INVESTMENT ZY is expected to generate 0.56 times more return on investment than CLEAN ENERGY. However, ECHO INVESTMENT ZY is 1.8 times less risky than CLEAN ENERGY. It trades about -0.11 of its potential returns per unit of risk. CLEAN ENERGY FUELS is currently generating about -0.14 per unit of risk. If you would invest  105.00  in ECHO INVESTMENT ZY on November 27, 2024 and sell it today you would lose (5.00) from holding ECHO INVESTMENT ZY or give up 4.76% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ECHO INVESTMENT ZY  vs.  CLEAN ENERGY FUELS

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0102030
JavaScript chart by amCharts 3.21.154I3 WIQ
       Timeline  
ECHO INVESTMENT ZY 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ECHO INVESTMENT ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ECHO INVESTMENT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb11.021.041.061.081.11.12
CLEAN ENERGY FUELS 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 rather sound basic indicators, CLEAN ENERGY is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2.42.62.833.2

ECHO INVESTMENT and CLEAN ENERGY Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.04-4.55-3.07-1.58-0.11.382.874.355.847.32 0.020.040.060.080.10
JavaScript chart by amCharts 3.21.154I3 WIQ
       Returns  

Pair Trading with ECHO INVESTMENT and CLEAN ENERGY

The main advantage of trading using opposite ECHO INVESTMENT and CLEAN ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECHO INVESTMENT position performs unexpectedly, CLEAN ENERGY 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 CLEAN ENERGY will offset losses from the drop in CLEAN ENERGY's long position.
The idea behind ECHO INVESTMENT ZY and CLEAN ENERGY FUELS 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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