Correlation Between Clean Energy and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both Clean Energy and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials, you can compare the effects of market volatilities on Clean Energy and Vulcan Materials 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 Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Energy and Vulcan Materials.
Diversification Opportunities for Clean Energy and Vulcan Materials
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Clean and Vulcan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Clean Energy i.e., Clean Energy and Vulcan Materials go up and down completely randomly.
Pair Corralation between Clean Energy and Vulcan Materials
Assuming the 90 days horizon Clean Energy Fuels is expected to generate 3.18 times more return on investment than Vulcan Materials. However, Clean Energy is 3.18 times more volatile than Vulcan Materials. It trades about -0.06 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.36 per unit of risk. If you would invest 261.00 in Clean Energy Fuels on September 25, 2024 and sell it today you would lose (15.00) from holding Clean Energy Fuels or give up 5.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clean Energy Fuels vs. Vulcan Materials
Performance |
| Timeline |
| Clean Energy Fuels |
| Vulcan Materials |
Clean Energy and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clean Energy and Vulcan Materials
The main advantage of trading using opposite Clean Energy and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy position performs unexpectedly, Vulcan Materials 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 Vulcan Materials will offset losses from the drop in Vulcan Materials' long position.| Clean Energy vs. SCANSOURCE | Clean Energy vs. United Breweries Co | Clean Energy vs. The Boston Beer | Clean Energy vs. TRADEDOUBLER AB SK |
| Vulcan Materials vs. MAROC TELECOM | Vulcan Materials vs. INTERSHOP Communications Aktiengesellschaft | Vulcan Materials vs. Verizon Communications | Vulcan Materials vs. Singapore Telecommunications Limited |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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