Correlation Between Dover and Clean Energy
Can any of the company-specific risk be diversified away by investing in both Dover 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 Dover and Clean Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dover and Clean Energy Technologies,, you can compare the effects of market volatilities on Dover 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 Dover with a short position of Clean Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dover and Clean Energy.
Diversification Opportunities for Dover and Clean Energy
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dover and Clean is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dover and Clean Energy Technologies, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Technol and Dover 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 Dover 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 Technol has no effect on the direction of Dover i.e., Dover and Clean Energy go up and down completely randomly.
Pair Corralation between Dover and Clean Energy
Considering the 90-day investment horizon Dover is expected to generate 0.21 times more return on investment than Clean Energy. However, Dover is 4.87 times less risky than Clean Energy. It trades about 0.22 of its potential returns per unit of risk. Clean Energy Technologies, is currently generating about 0.0 per unit of risk. If you would invest 19,299 in Dover on August 31, 2024 and sell it today you would earn a total of 1,352 from holding Dover or generate 7.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dover vs. Clean Energy Technologies,
Performance |
| Timeline |
| Dover |
| Clean Energy Technol |
Dover and Clean Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dover and Clean Energy
The main advantage of trading using opposite Dover and Clean Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dover 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 Dover and Clean Energy Technologies, 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.| Clean Energy vs. Graco Inc | Clean Energy vs. Franklin Electric Co | Clean Energy vs. Flowserve | Clean Energy vs. Donaldson |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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