Correlation Between Innovate Corp and Ameresco

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

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

Diversification Opportunities for Innovate Corp and Ameresco

0.31

Correlation Coefficient

Innovate Corp  Ameresco

Weak diversification

The 3 months correlation between Innovate and Ameresco is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Innovate Corp and Ameresco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameresco and Innovate Corp 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 Innovate Corp are associated (or correlated) with Ameresco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameresco has no effect on the direction of Innovate Corp i.e., Innovate Corp and Ameresco go up and down completely randomly.

Pair Corralation between Innovate Corp and Ameresco

Given the investment horizon of 90 days Innovate Corp is expected to under-perform the Ameresco. But the stock apears to be less risky and, when comparing its historical volatility, Innovate Corp is 1.03 times less risky than Ameresco. The stock trades about -0.32 of its potential returns per unit of risk. The Ameresco is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  2,499  in Ameresco on January 29, 2024 and sell it today you would lose (351.00) from holding Ameresco or give up 14.05% of portfolio value over 90 days.

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

Innovate Corp  vs.  Ameresco

Innovate Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovate Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ameresco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ameresco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ameresco is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Innovate Corp and Ameresco

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

The idea behind Innovate Corp and Ameresco 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.