Correlation Between Energy Recovery and Sparta Capital

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

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

Diversification Opportunities for Energy Recovery and Sparta Capital

0.72

Correlation Coefficient

Energy Recovery  Sparta Capital

Poor diversification

The 3 months correlation between Energy and Sparta is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Energy Recovery and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and Energy Recovery 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 Energy Recovery are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Energy Recovery i.e., Energy Recovery and Sparta Capital go up and down completely randomly.

Pair Corralation between Energy Recovery and Sparta Capital

Given the investment horizon of 90 days Energy Recovery is expected to generate 3.41 times less return on investment than Sparta Capital. But when comparing it to its historical volatility, Energy Recovery is 3.87 times less risky than Sparta Capital. It trades about 0.19 of its potential returns per unit of risk. Sparta Capital is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.11  in Sparta Capital on August 6, 2025 and sell it today you would earn a total of  0.10  from holding Sparta Capital or generate 90.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

Energy Recovery  vs.  Sparta Capital

Energy Recovery

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Recovery are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Energy Recovery demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sparta Capital

Risk-Adjusted Performance

Good

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

Pair Trading with Energy Recovery and Sparta Capital

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

The idea behind Energy Recovery and Sparta Capital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.