Correlation Between Current Water and Thermal Energy
Can any of the company-specific risk be diversified away by investing in both Current Water and Thermal 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 Current Water and Thermal Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Current Water Technologies and Thermal Energy International, you can compare the effects of market volatilities on Current Water and Thermal 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 Current Water with a short position of Thermal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Current Water and Thermal Energy.
Diversification Opportunities for Current Water and Thermal Energy
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Current and Thermal is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Current Water Technologies and Thermal Energy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermal Energy Inter and Current Water 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 Current Water Technologies are associated (or correlated) with Thermal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermal Energy Inter has no effect on the direction of Current Water i.e., Current Water and Thermal Energy go up and down completely randomly.
Pair Corralation between Current Water and Thermal Energy
Assuming the 90 days trading horizon Current Water Technologies is expected to generate 2.99 times more return on investment than Thermal Energy. However, Current Water is 2.99 times more volatile than Thermal Energy International. It trades about 0.05 of its potential returns per unit of risk. Thermal Energy International is currently generating about -0.02 per unit of risk. If you would invest 3.00 in Current Water Technologies on August 25, 2024 and sell it today you would lose (0.50) from holding Current Water Technologies or give up 16.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.47% |
| Values | Daily Returns |
Current Water Technologies vs. Thermal Energy International
Performance |
| Timeline |
| Current Water Techno |
| Thermal Energy Inter |
Current Water and Thermal Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Current Water and Thermal Energy
The main advantage of trading using opposite Current Water and Thermal Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Current Water position performs unexpectedly, Thermal 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 Thermal Energy will offset losses from the drop in Thermal Energy's long position.| Current Water vs. Clear Blue Technologies | Current Water vs. Thermal Energy International | Current Water vs. Aurora Solar Technologies |
| Thermal Energy vs. Clear Blue Technologies | Thermal Energy vs. Current Water Technologies | Thermal Energy vs. Aurora Solar Technologies |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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