Correlation Between Clean Air and Stornoway Diamond

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

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

Diversification Opportunities for Clean Air and Stornoway Diamond

0.23

Correlation Coefficient

Clean Air  Stornoway Diamond

Modest diversification

The 3 months correlation between Clean and Stornoway is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Clean Air Metals and Stornoway Diamond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stornoway Diamond and Clean Air 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 Air Metals are associated (or correlated) with Stornoway Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stornoway Diamond has no effect on the direction of Clean Air i.e., Clean Air and Stornoway Diamond go up and down completely randomly.

Pair Corralation between Clean Air and Stornoway Diamond

Assuming the 90 days horizon Clean Air is expected to generate 2.41 times less return on investment than Stornoway Diamond. But when comparing it to its historical volatility, Clean Air Metals is 5.78 times less risky than Stornoway Diamond. It trades about 0.16 of its potential returns per unit of risk. Stornoway Diamond is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Stornoway Diamond on September 11, 2025 and sell it today you would lose (0.04) from holding Stornoway Diamond or give up 80.0% of portfolio value over 90 days.

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

Clean Air Metals  vs.  Stornoway Diamond

Clean Air Metals

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Air Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Clean Air reported solid returns over the last few months and may actually be approaching a breakup point.

Stornoway Diamond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stornoway Diamond are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Stornoway Diamond reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clean Air and Stornoway Diamond

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

The idea behind Clean Air Metals and Stornoway Diamond 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.