Correlation Between ITM Power and CVR Energy
Can any of the company-specific risk be diversified away by investing in both ITM Power and CVR 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 ITM Power and CVR Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITM Power and CVR Energy, you can compare the effects of market volatilities on ITM Power and CVR 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 ITM Power with a short position of CVR Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITM Power and CVR Energy.
Diversification Opportunities for ITM Power and CVR Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ITM and CVR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ITM Power and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and ITM Power 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 ITM Power are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of ITM Power i.e., ITM Power and CVR Energy go up and down completely randomly.
Pair Corralation between ITM Power and CVR Energy
Assuming the 90 days trading horizon ITM Power is expected to under-perform the CVR Energy. In addition to that, ITM Power is 1.25 times more volatile than CVR Energy. It trades about -0.04 of its total potential returns per unit of risk. CVR Energy is currently generating about -0.01 per unit of volatility. If you would invest 2,811 in CVR Energy on September 3, 2024 and sell it today you would lose (885.00) from holding CVR Energy or give up 31.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.18% |
| Values | Daily Returns |
ITM Power vs. CVR Energy
Performance |
| Timeline |
| ITM Power |
| CVR Energy |
ITM Power and CVR Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITM Power and CVR Energy
The main advantage of trading using opposite ITM Power and CVR Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITM Power position performs unexpectedly, CVR 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 CVR Energy will offset losses from the drop in CVR Energy's long position.| ITM Power vs. Tyson Foods Cl | ITM Power vs. Westlake Chemical Corp | ITM Power vs. Associated British Foods | ITM Power vs. Aeorema Communications Plc |
| CVR Energy vs. Compagnie Plastic Omnium | CVR Energy vs. Pfeiffer Vacuum Technology | CVR Energy vs. Spirent Communications plc | CVR Energy vs. Alfa Financial Software |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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