Correlation Between DAIRY FARM and Clean Energy
Can any of the company-specific risk be diversified away by investing in both DAIRY FARM 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 DAIRY FARM and Clean Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAIRY FARM INTL and Clean Energy Fuels, you can compare the effects of market volatilities on DAIRY FARM 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 DAIRY FARM with a short position of Clean Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and Clean Energy.
Diversification Opportunities for DAIRY FARM and Clean Energy
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between DAIRY and Clean is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL 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 DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and Clean Energy go up and down completely randomly.
Pair Corralation between DAIRY FARM and Clean Energy
Assuming the 90 days trading horizon DAIRY FARM is expected to generate 85.54 times less return on investment than Clean Energy. But when comparing it to its historical volatility, DAIRY FARM INTL is 3.55 times less risky than Clean Energy. It trades about 0.01 of its potential returns per unit of risk. Clean Energy Fuels is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 261.00 in Clean Energy Fuels on October 16, 2024 and sell it today you would earn a total of 18.00 from holding Clean Energy Fuels or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DAIRY FARM INTL vs. Clean Energy Fuels
Performance |
| Timeline |
| DAIRY FARM INTL |
| Clean Energy Fuels |
DAIRY FARM and Clean Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAIRY FARM and Clean Energy
The main advantage of trading using opposite DAIRY FARM and Clean Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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.| DAIRY FARM vs. ON SEMICONDUCTOR | DAIRY FARM vs. GOLD ROAD RES | DAIRY FARM vs. BE Semiconductor Industries | DAIRY FARM vs. Broadridge Financial Solutions |
| Clean Energy vs. AGRICULTBK HADR25 YC | Clean Energy vs. DAIRY FARM INTL | Clean Energy vs. Federal Agricultural Mortgage | Clean Energy vs. BC IRON |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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