Correlation Between Absolute Clean and Eastern Power
Can any of the company-specific risk be diversified away by investing in both Absolute Clean and Eastern Power 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 Absolute Clean and Eastern Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Clean Energy and Eastern Power Group, you can compare the effects of market volatilities on Absolute Clean and Eastern Power 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 Absolute Clean with a short position of Eastern Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Clean and Eastern Power.
Diversification Opportunities for Absolute Clean and Eastern Power
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Absolute and Eastern is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Clean Energy and Eastern Power Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Power Group and Absolute Clean 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 Absolute Clean Energy are associated (or correlated) with Eastern Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Power Group has no effect on the direction of Absolute Clean i.e., Absolute Clean and Eastern Power go up and down completely randomly.
Pair Corralation between Absolute Clean and Eastern Power
Assuming the 90 days trading horizon Absolute Clean Energy is expected to generate 31.15 times more return on investment than Eastern Power. However, Absolute Clean is 31.15 times more volatile than Eastern Power Group. It trades about 0.1 of its potential returns per unit of risk. Eastern Power Group is currently generating about -0.07 per unit of risk. If you would invest 0.00 in Absolute Clean Energy on November 2, 2024 and sell it today you would earn a total of 130.00 from holding Absolute Clean Energy or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.03% |
| Values | Daily Returns |
Absolute Clean Energy vs. Eastern Power Group
Performance |
| Timeline |
| Absolute Clean Energy |
| Eastern Power Group |
Absolute Clean and Eastern Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Clean and Eastern Power
The main advantage of trading using opposite Absolute Clean and Eastern Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Clean position performs unexpectedly, Eastern Power 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 Eastern Power will offset losses from the drop in Eastern Power's long position.| Absolute Clean vs. BCPG Public | Absolute Clean vs. CK Power Public | Absolute Clean vs. TPI Polene Power | Absolute Clean vs. Earth Tech Environment |
| Eastern Power vs. BCPG Public | Eastern Power vs. Diamond Building Products | Eastern Power vs. Earth Tech Environment | Eastern Power vs. TPI Polene Power |
Check out your portfolio center.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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