Correlation Between Clean Energy and Iron Road

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

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

Diversification Opportunities for Clean Energy and Iron Road

-0.48

Correlation Coefficient

Clean Energy  Iron Road

Very good diversification

The 3 months correlation between Clean and Iron is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and Iron Road Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road Limited and Clean Energy 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 Clean Energy Fuels are associated (or correlated) with Iron Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Road Limited has no effect on the direction of Clean Energy i.e., Clean Energy and Iron Road go up and down completely randomly.

Pair Corralation between Clean Energy and Iron Road

Assuming the 90 days horizon Clean Energy is expected to generate 13.45 times less return on investment than Iron Road. But when comparing it to its historical volatility, Clean Energy Fuels is 14.97 times less risky than Iron Road. It trades about 0.15 of its potential returns per unit of risk. Iron Road Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1.05  in Iron Road Limited on April 21, 2025 and sell it today you would lose (0.65) from holding Iron Road Limited or give up 61.9% of portfolio value over 90 days.

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

Clean Energy Fuels  vs.  Iron Road Limited

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 fragile basic indicators, Clean Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Iron Road Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iron Road Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Iron Road reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clean Energy and Iron Road

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

The idea behind Clean Energy Fuels and Iron Road Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.