Correlation Between Aker Carbon and Delta CleanTech

Can any of the company-specific risk be diversified away by investing in both Aker Carbon and Delta CleanTech 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 Aker Carbon and Delta CleanTech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aker Carbon Capture and Delta CleanTech, you can compare the effects of market volatilities on Aker Carbon and Delta CleanTech 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 Aker Carbon with a short position of Delta CleanTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker Carbon and Delta CleanTech.

Diversification Opportunities for Aker Carbon and Delta CleanTech

-0.64

Correlation Coefficient

Aker Carbon  Delta CleanTech

Excellent diversification

The 3 months correlation between Aker and Delta is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aker Carbon Capture and Delta CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta CleanTech and Aker Carbon 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 Aker Carbon Capture are associated (or correlated) with Delta CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta CleanTech has no effect on the direction of Aker Carbon i.e., Aker Carbon and Delta CleanTech go up and down completely randomly.

Pair Corralation between Aker Carbon and Delta CleanTech

Assuming the 90 days horizon Aker Carbon Capture is expected to under-perform the Delta CleanTech. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aker Carbon Capture is 2.56 times less risky than Delta CleanTech. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Delta CleanTech is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.71  in Delta CleanTech on February 19, 2024 and sell it today you would earn a total of  0.84  from holding Delta CleanTech or generate 49.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Aker Carbon Capture  vs.  Delta CleanTech

Aker Carbon Capture

Risk-Adjusted Performance

0 of 100

Very Weak

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

Delta CleanTech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta CleanTech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Delta CleanTech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aker Carbon and Delta CleanTech

The main advantage of trading using opposite Aker Carbon and Delta CleanTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker Carbon position performs unexpectedly, Delta CleanTech 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 Delta CleanTech will offset losses from the drop in Delta CleanTech's long position.

The idea behind Aker Carbon Capture and Delta CleanTech 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.