Correlation Between Clean Energy and Aozora Bank
Can any of the company-specific risk be diversified away by investing in both Clean Energy and Aozora Bank 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 Clean Energy and Aozora Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clean Energy Fuels and Aozora Bank, you can compare the effects of market volatilities on Clean Energy and Aozora Bank 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 Clean Energy with a short position of Aozora Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Energy and Aozora Bank.
Diversification Opportunities for Clean Energy and Aozora Bank
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Clean and Aozora is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and Aozora Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora Bank and Clean 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 Clean Energy Fuels are associated (or correlated) with Aozora Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aozora Bank has no effect on the direction of Clean Energy i.e., Clean Energy and Aozora Bank go up and down completely randomly.
Pair Corralation between Clean Energy and Aozora Bank
Assuming the 90 days horizon Clean Energy Fuels is expected to generate 2.53 times more return on investment than Aozora Bank. However, Clean Energy is 2.53 times more volatile than Aozora Bank. It trades about 0.25 of its potential returns per unit of risk. Aozora Bank is currently generating about -0.03 per unit of risk. If you would invest 261.00 in Clean Energy Fuels on October 15, 2024 and sell it today you would earn a total of 36.00 from holding Clean Energy Fuels or generate 13.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clean Energy Fuels vs. Aozora Bank
Performance |
| Timeline |
| Clean Energy Fuels |
| Aozora Bank |
Clean Energy and Aozora Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clean Energy and Aozora Bank
The main advantage of trading using opposite Clean Energy and Aozora Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy position performs unexpectedly, Aozora Bank 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 Aozora Bank will offset losses from the drop in Aozora Bank's long position.| Clean Energy vs. AGRICULTBK HADR25 YC | Clean Energy vs. DAIRY FARM INTL | Clean Energy vs. Federal Agricultural Mortgage | Clean Energy vs. BC IRON |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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