Correlation Between Delta CleanTech and Energy
Can any of the company-specific risk be diversified away by investing in both Delta CleanTech and 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 Delta CleanTech and Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Delta CleanTech and Energy and Water, you can compare the effects of market volatilities on Delta CleanTech and 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 Delta CleanTech with a short position of Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta CleanTech and Energy.
Diversification Opportunities for Delta CleanTech and Energy
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Delta and Energy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Delta CleanTech and Energy and Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy and Water and Delta CleanTech 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 Delta CleanTech are associated (or correlated) with Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy and Water has no effect on the direction of Delta CleanTech i.e., Delta CleanTech and Energy go up and down completely randomly.
Pair Corralation between Delta CleanTech and Energy
Assuming the 90 days horizon Delta CleanTech is expected to generate 1.14 times more return on investment than Energy. However, Delta CleanTech is 1.14 times more volatile than Energy and Water. It trades about 0.06 of its potential returns per unit of risk. Energy and Water is currently generating about -0.1 per unit of risk. If you would invest 1.71 in Delta CleanTech on August 27, 2024 and sell it today you would lose (0.27) from holding Delta CleanTech or give up 15.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Delta CleanTech vs. Energy and Water
Performance |
| Timeline |
| Delta CleanTech |
| Energy and Water |
Delta CleanTech and Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta CleanTech and Energy
The main advantage of trading using opposite Delta CleanTech and Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta CleanTech position performs unexpectedly, 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 Energy will offset losses from the drop in Energy's long position.| Delta CleanTech vs. TOMI Environmental Solutions | Delta CleanTech vs. Zurn Elkay Water | Delta CleanTech vs. Federal Signal | Delta CleanTech vs. Energy Recovery |
| Energy vs. TOMI Environmental Solutions | Energy vs. Zurn Elkay Water | Energy vs. Federal Signal | Energy vs. Energy Recovery |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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