Correlation Between Clean Energy and British American
Can any of the company-specific risk be diversified away by investing in both Clean Energy and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Clean Energy and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Energy and British American.
Diversification Opportunities for Clean Energy and British American
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Clean and British is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Clean Energy i.e., Clean Energy and British American go up and down completely randomly.
Pair Corralation between Clean Energy and British American
Assuming the 90 days horizon Clean Energy Fuels is expected to under-perform the British American. In addition to that, Clean Energy is 3.41 times more volatile than British American Tobacco. It trades about -0.01 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.02 per unit of volatility. If you would invest 3,305 in British American Tobacco on September 3, 2024 and sell it today you would earn a total of 290.00 from holding British American Tobacco or generate 8.77% 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. British American Tobacco
Performance |
| Timeline |
| Clean Energy Fuels |
| British American Tobacco |
Clean Energy and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clean Energy and British American
The main advantage of trading using opposite Clean Energy and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Clean Energy vs. Marathon Petroleum Corp | Clean Energy vs. Neste Oyj | Clean Energy vs. ENEOS Holdings | Clean Energy vs. PTT OILRETBUS FOR BA10 |
| British American vs. British American Tobacco | British American vs. Japan Tobacco | British American vs. JAPAN TOBACCO UNSPADR12 | British American vs. Imperial Brands PLC |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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