Correlation Between Prime Road and Absolute Clean

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

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

Diversification Opportunities for Prime Road and Absolute Clean

-0.3

Correlation Coefficient

Prime Road  Absolute Clean

Very good diversification

The 3 months correlation between Prime and Absolute is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Prime Road Power and Absolute Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Clean Energy and Prime Road 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 Prime Road Power are associated (or correlated) with Absolute Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Clean Energy has no effect on the direction of Prime Road i.e., Prime Road and Absolute Clean go up and down completely randomly.

Pair Corralation between Prime Road and Absolute Clean

Assuming the 90 days trading horizon Prime Road Power is expected to generate 9.0 times more return on investment than Absolute Clean. However, Prime Road is 9.0 times more volatile than Absolute Clean Energy. It trades about 0.12 of its potential returns per unit of risk. Absolute Clean Energy is currently generating about -0.04 per unit of risk. If you would invest  5.00  in Prime Road Power on April 22, 2025 and sell it today you would earn a total of  3.00  from holding Prime Road Power or generate 60.0% return on investment over 90 days.

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

Prime Road Power  vs.  Absolute Clean Energy

Prime Road Power

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Road Power are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Prime Road sustained solid returns over the last few months and may actually be approaching a breakup point.

Absolute Clean Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Absolute Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Absolute Clean is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Prime Road and Absolute Clean

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

The idea behind Prime Road Power and Absolute Clean Energy 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 Valuation module to check real value of public entities based on technical and fundamental data.