Correlation Between Energy and Delta CleanTech
Can any of the company-specific risk be diversified away by investing in both Energy and Delta CleanTech 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 Energy and Delta CleanTech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy and Water and Delta CleanTech, you can compare the effects of market volatilities on Energy and Delta CleanTech 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 Energy with a short position of Delta CleanTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy and Delta CleanTech.
Diversification Opportunities for Energy and Delta CleanTech
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Energy and Delta is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Water and Delta CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta CleanTech and Energy 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 Energy and Water are associated (or correlated) with Delta CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta CleanTech has no effect on the direction of Energy i.e., Energy and Delta CleanTech go up and down completely randomly.
Pair Corralation between Energy and Delta CleanTech
Given the investment horizon of 90 days Energy and Water is expected to under-perform the Delta CleanTech. But the otc stock apears to be less risky and, when comparing its historical volatility, Energy and Water is 1.14 times less risky than Delta CleanTech. The otc stock trades about -0.1 of its potential returns per unit of risk. The Delta CleanTech is currently generating about 0.06 of returns per unit of risk over similar time horizon. 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 |
Energy and Water vs. Delta CleanTech
Performance |
| Timeline |
| Energy and Water |
| Delta CleanTech |
Energy and Delta CleanTech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy and Delta CleanTech
The main advantage of trading using opposite Energy and Delta CleanTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy position performs unexpectedly, Delta CleanTech 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 Delta CleanTech will offset losses from the drop in Delta CleanTech's long position.| Energy vs. TOMI Environmental Solutions | Energy vs. Zurn Elkay Water | Energy vs. Federal Signal | Energy vs. Energy Recovery |
| Delta CleanTech vs. TOMI Environmental Solutions | Delta CleanTech vs. Zurn Elkay Water | Delta CleanTech vs. Federal Signal | Delta CleanTech 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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