Correlation Between ClearSign Combustion and Energy Recovery

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Can any of the company-specific risk be diversified away by investing in both ClearSign Combustion and Energy Recovery 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 ClearSign Combustion and Energy Recovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ClearSign Combustion and Energy Recovery, you can compare the effects of market volatilities on ClearSign Combustion and Energy Recovery 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 ClearSign Combustion with a short position of Energy Recovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of ClearSign Combustion and Energy Recovery.

Diversification Opportunities for ClearSign Combustion and Energy Recovery

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between ClearSign and Energy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ClearSign Combustion and Energy Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Recovery and ClearSign Combustion 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 ClearSign Combustion are associated (or correlated) with Energy Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Recovery has no effect on the direction of ClearSign Combustion i.e., ClearSign Combustion and Energy Recovery go up and down completely randomly.

Pair Corralation between ClearSign Combustion and Energy Recovery

Given the investment horizon of 90 days ClearSign Combustion is expected to under-perform the Energy Recovery. In addition to that, ClearSign Combustion is 3.88 times more volatile than Energy Recovery. It trades about -0.02 of its total potential returns per unit of risk. Energy Recovery is currently generating about 0.25 per unit of volatility. If you would invest  1,958  in Energy Recovery on September 10, 2022 and sell it today you would earn a total of  214.00  from holding Energy Recovery or generate 10.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ClearSign Combustion  vs.  Energy Recovery

 Performance (%) 
       Timeline  
ClearSign Combustion 
ClearSign Performance
0 of 100
Over the last 90 days ClearSign Combustion has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ClearSign Price Channel

Energy Recovery 
Energy Performance
0 of 100
Over the last 90 days Energy Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Energy Price Channel

ClearSign Combustion and Energy Recovery Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ClearSign Combustion and Energy Recovery

The main advantage of trading using opposite ClearSign Combustion and Energy Recovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ClearSign Combustion position performs unexpectedly, Energy Recovery 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 Energy Recovery will offset losses from the drop in Energy Recovery's long position.
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The idea behind ClearSign Combustion and Energy Recovery pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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