Correlation Between Clean Energy and Carsales
Can any of the company-specific risk be diversified away by investing in both Clean Energy and Carsales 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 Carsales 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 Carsales, you can compare the effects of market volatilities on Clean Energy and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Energy and Carsales.
Diversification Opportunities for Clean Energy and Carsales
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Clean and Carsales is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of Clean Energy i.e., Clean Energy and Carsales go up and down completely randomly.
Pair Corralation between Clean Energy and Carsales
Assuming the 90 days horizon Clean Energy Fuels is expected to under-perform the Carsales. In addition to that, Clean Energy is 3.73 times more volatile than Carsales. It trades about -0.51 of its total potential returns per unit of risk. Carsales is currently generating about -0.41 per unit of volatility. If you would invest 2,260 in Carsales on December 13, 2024 and sell it today you would lose (290.00) from holding Carsales or give up 12.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clean Energy Fuels vs. Carsales
Performance |
| Timeline |
| Clean Energy Fuels |
| Carsales |
Clean Energy and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clean Energy and Carsales
The main advantage of trading using opposite Clean Energy and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| Clean Energy vs. CSSC Offshore Marine | ||
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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