Correlation Between Azure Power and Energy Vault

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

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

Diversification Opportunities for Azure Power and Energy Vault

-0.45

Correlation Coefficient

Azure Power  Energy Vault

Very good diversification

The 3 months correlation between Azure and Energy is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Azure Power Global and Energy Vault Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Vault Holdings and Azure Power 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 Azure Power Global are associated (or correlated) with Energy Vault. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Vault Holdings has no effect on the direction of Azure Power i.e., Azure Power and Energy Vault go up and down completely randomly.

Pair Corralation between Azure Power and Energy Vault

If you would invest  94.00  in Energy Vault Holdings on July 29, 2024 and sell it today you would earn a total of  72.00  from holding Energy Vault Holdings or generate 76.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Azure Power Global  vs.  Energy Vault Holdings

Azure Power Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Energy Vault Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Vault Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Energy Vault showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azure Power and Energy Vault

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

The idea behind Azure Power Global and Energy Vault Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.