Correlation Between STHREE PLC and Clean Energy

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

By analyzing existing cross correlation between STHREE PLC LS and Clean Energy Fuels, you can compare the effects of market volatilities on STHREE PLC and Clean Energy 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 STHREE PLC with a short position of Clean Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of STHREE PLC and Clean Energy.

Diversification Opportunities for STHREE PLC and Clean Energy

0.04

Correlation Coefficient

STHREE PLC  Clean Energy

Significant diversification

The 3 months correlation between STHREE and Clean is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding STHREE PLC LS and Clean Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Fuels and STHREE PLC 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 STHREE PLC LS are associated (or correlated) with Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Fuels has no effect on the direction of STHREE PLC i.e., STHREE PLC and Clean Energy go up and down completely randomly.

Pair Corralation between STHREE PLC and Clean Energy

Assuming the 90 days horizon STHREE PLC LS is expected to generate 0.24 times more return on investment than Clean Energy. However, STHREE PLC LS is 4.15 times less risky than Clean Energy. It trades about 0.1 of its potential returns per unit of risk. Clean Energy Fuels is currently generating about -0.02 per unit of risk. If you would invest  422.00  in STHREE PLC LS on September 12, 2024 and sell it today you would earn a total of  10.00  from holding STHREE PLC LS or generate 2.37% return on investment over 90 days.

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

STHREE PLC LS  vs.  Clean Energy Fuels

STHREE PLC LS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Clean Energy Fuels

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Energy Fuels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Clean Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with STHREE PLC and Clean Energy

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

The idea behind STHREE PLC LS and Clean Energy Fuels 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.