Correlation Between Emeren and Alpine 4

Can any of the company-specific risk be diversified away by investing in both Emeren and Alpine 4 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 Emeren and Alpine 4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emeren Group and Alpine 4 Holdings, you can compare the effects of market volatilities on Emeren and Alpine 4 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 Emeren with a short position of Alpine 4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emeren and Alpine 4.

Diversification Opportunities for Emeren and Alpine 4

-0.43

Correlation Coefficient

Emeren  Alpine 4

Very good diversification

The 3 months correlation between Emeren and Alpine is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Emeren Group and Alpine 4 Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpine 4 Holdings and Emeren 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 Emeren Group are associated (or correlated) with Alpine 4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpine 4 Holdings has no effect on the direction of Emeren i.e., Emeren and Alpine 4 go up and down completely randomly.

Pair Corralation between Emeren and Alpine 4

Considering the 90-day investment horizon Emeren Group is expected to generate 0.8 times more return on investment than Alpine 4. However, Emeren Group is 1.26 times less risky than Alpine 4. It trades about 0.2 of its potential returns per unit of risk. Alpine 4 Holdings is currently generating about -0.01 per unit of risk. If you would invest  161.00  in Emeren Group on July 10, 2024 and sell it today you would earn a total of  112.00  from holding Emeren Group or generate 69.57% return on investment over 90 days.

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

Emeren Group  vs.  Alpine 4 Holdings

Emeren Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emeren Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Emeren disclosed solid returns over the last few months and may actually be approaching a breakup point.

Alpine 4 Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpine 4 Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Alpine 4 is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Emeren and Alpine 4

The main advantage of trading using opposite Emeren and Alpine 4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emeren position performs unexpectedly, Alpine 4 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 Alpine 4 will offset losses from the drop in Alpine 4's long position.

The idea behind Emeren Group and Alpine 4 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.