Correlation Between ClearSign Combustion and China Natural

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

By analyzing existing cross correlation between ClearSign Combustion and China Natural Resources, you can compare the effects of market volatilities on ClearSign Combustion and China Natural 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 China Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of ClearSign Combustion and China Natural.

Diversification Opportunities for ClearSign Combustion and China Natural

0.07

Correlation Coefficient

ClearSign Combustion  China Natural

Significant diversification

The 3 months correlation between ClearSign and China is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ClearSign Combustion and China Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Natural Resources 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 China Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Natural Resources has no effect on the direction of ClearSign Combustion i.e., ClearSign Combustion and China Natural go up and down completely randomly.

Pair Corralation between ClearSign Combustion and China Natural

Given the investment horizon of 90 days ClearSign Combustion is expected to generate 4.41 times less return on investment than China Natural. But when comparing it to its historical volatility, ClearSign Combustion is 2.22 times less risky than China Natural. It trades about 0.01 of its potential returns per unit of risk. China Natural Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  375.00  in China Natural Resources on January 26, 2024 and sell it today you would lose (271.00) from holding China Natural Resources or give up 72.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

ClearSign Combustion  vs.  China Natural Resources

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.

China Natural Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Natural Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, China Natural reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ClearSign Combustion and China Natural

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

The idea behind ClearSign Combustion and China Natural Resources 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.