Correlation Between Stem and Clearway Energy
Can any of the company-specific risk be diversified away by investing in both Stem and Clearway 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 Stem and Clearway Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stem Inc and Clearway Energy Class, you can compare the effects of market volatilities on Stem and Clearway 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 Stem with a short position of Clearway Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stem and Clearway Energy.
Diversification Opportunities for Stem and Clearway Energy
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Stem and Clearway is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Clearway Energy Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy Class and Stem 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 Stem Inc are associated (or correlated) with Clearway Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearway Energy Class has no effect on the direction of Stem i.e., Stem and Clearway Energy go up and down completely randomly.
Pair Corralation between Stem and Clearway Energy
Given the investment horizon of 90 days Stem Inc is expected to under-perform the Clearway Energy. In addition to that, Stem is 5.71 times more volatile than Clearway Energy Class. It trades about -0.2 of its total potential returns per unit of risk. Clearway Energy Class is currently generating about 0.3 per unit of volatility. If you would invest 2,593 in Clearway Energy Class on December 2, 2024 and sell it today you would earn a total of 209.00 from holding Clearway Energy Class or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stem Inc vs. Clearway Energy Class
Performance |
| Timeline |
| Stem Inc |
| Clearway Energy Class |
Stem and Clearway Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stem and Clearway Energy
The main advantage of trading using opposite Stem and Clearway Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stem position performs unexpectedly, Clearway 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 Clearway Energy will offset losses from the drop in Clearway Energy's long position.| Stem vs. Palo Alto Networks | ||
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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