Correlation Between Euro Tech and Aker Carbon

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

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

Diversification Opportunities for Euro Tech and Aker Carbon

-0.01

Correlation Coefficient

Euro Tech  Aker Carbon

Good diversification

The 3 months correlation between Euro and Aker is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Euro Tech Holdings and Aker Carbon Capture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Carbon Capture and Euro Tech 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 Euro Tech Holdings are associated (or correlated) with Aker Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Carbon Capture has no effect on the direction of Euro Tech i.e., Euro Tech and Aker Carbon go up and down completely randomly.

Pair Corralation between Euro Tech and Aker Carbon

Given the investment horizon of 90 days Euro Tech Holdings is expected to generate 0.3 times more return on investment than Aker Carbon. However, Euro Tech Holdings is 3.33 times less risky than Aker Carbon. It trades about 0.15 of its potential returns per unit of risk. Aker Carbon Capture is currently generating about 0.02 per unit of risk. If you would invest  139.00  in Euro Tech Holdings on March 2, 2024 and sell it today you would earn a total of  30.00  from holding Euro Tech Holdings or generate 21.58% return on investment over 90 days.

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

Euro Tech Holdings  vs.  Aker Carbon Capture

Euro Tech Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Euro Tech Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Euro Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aker Carbon Capture

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Carbon Capture are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Aker Carbon may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Euro Tech and Aker Carbon

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

The idea behind Euro Tech Holdings and Aker Carbon Capture 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.