Correlation Between AUST AGRICULTURAL and Clean Energy

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

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

Diversification Opportunities for AUST AGRICULTURAL and Clean Energy

-0.15

Correlation Coefficient

AUST AGRICULTURAL  Clean Energy

Good diversification

The 3 months correlation between AUST and Clean is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL 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 AUST AGRICULTURAL 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 AUST AGRICULTURAL 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 AUST AGRICULTURAL i.e., AUST AGRICULTURAL and Clean Energy go up and down completely randomly.

Pair Corralation between AUST AGRICULTURAL and Clean Energy

Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to generate 78.87 times less return on investment than Clean Energy. But when comparing it to its historical volatility, AUST AGRICULTURAL is 3.36 times less risky than Clean Energy. It trades about 0.01 of its potential returns per unit of risk. Clean Energy Fuels is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  123.00  in Clean Energy Fuels on April 20, 2025 and sell it today you would earn a total of  53.00  from holding Clean Energy Fuels or generate 43.09% return on investment over 90 days.

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

AUST AGRICULTURAL  vs.  Clean Energy Fuels

AUST AGRICULTURAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days AUST AGRICULTURAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AUST AGRICULTURAL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Clean Energy Fuels

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Energy Fuels are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Clean Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AUST AGRICULTURAL and Clean Energy

The main advantage of trading using opposite AUST AGRICULTURAL and Clean Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUST AGRICULTURAL 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 AUST AGRICULTURAL 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.