Correlation Between CDTi Advanced and ClearSign Combustion

Can any of the company-specific risk be diversified away by investing in both CDTi Advanced and ClearSign Combustion 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 CDTi Advanced and ClearSign Combustion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CDTi Advanced Materials and ClearSign Combustion, you can compare the effects of market volatilities on CDTi Advanced and ClearSign Combustion 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 CDTi Advanced with a short position of ClearSign Combustion. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDTi Advanced and ClearSign Combustion.

Diversification Opportunities for CDTi Advanced and ClearSign Combustion

0.44

Correlation Coefficient

CDTi Advanced  ClearSign Combustion

Very weak diversification

The 3 months correlation between CDTi and ClearSign is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CDTi Advanced Materials and ClearSign Combustion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearSign Combustion and CDTi Advanced 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 CDTi Advanced Materials are associated (or correlated) with ClearSign Combustion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearSign Combustion has no effect on the direction of CDTi Advanced i.e., CDTi Advanced and ClearSign Combustion go up and down completely randomly.

Pair Corralation between CDTi Advanced and ClearSign Combustion

Given the investment horizon of 90 days CDTi Advanced Materials is expected to generate 2.01 times more return on investment than ClearSign Combustion. However, CDTi Advanced is 2.01 times more volatile than ClearSign Combustion. It trades about 0.02 of its potential returns per unit of risk. ClearSign Combustion is currently generating about 0.01 per unit of risk. If you would invest  29.00  in CDTi Advanced Materials on January 26, 2024 and sell it today you would lose (14.00) from holding CDTi Advanced Materials or give up 48.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	38.79%
Values	Daily Returns

CDTi Advanced Materials  vs.  ClearSign Combustion

CDTi Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDTi Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CDTi Advanced is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

ClearSign Combustion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ClearSign Combustion has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with CDTi Advanced and ClearSign Combustion

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

The idea behind CDTi Advanced Materials and ClearSign Combustion 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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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.