Correlation Between Clipper Fund and Mairs Power

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

By analyzing existing cross correlation between Clipper Fund Inc and Mairs Power Balanced, you can compare the effects of market volatilities on Clipper Fund and Mairs Power 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 Clipper Fund with a short position of Mairs Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clipper Fund and Mairs Power.

Diversification Opportunities for Clipper Fund and Mairs Power

0.9

Correlation Coefficient

Clipper Fund  Mairs Power

Almost no diversification

The 3 months correlation between Clipper and Mairs is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Clipper Fund Inc and Mairs Power Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mairs Power Balanced and Clipper Fund 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 Clipper Fund Inc are associated (or correlated) with Mairs Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mairs Power Balanced has no effect on the direction of Clipper Fund i.e., Clipper Fund and Mairs Power go up and down completely randomly.

Pair Corralation between Clipper Fund and Mairs Power

Assuming the 90 days horizon Clipper Fund Inc is expected to generate 1.95 times more return on investment than Mairs Power. However, Clipper Fund is 1.95 times more volatile than Mairs Power Balanced. It trades about 0.18 of its potential returns per unit of risk. Mairs Power Balanced is currently generating about 0.11 per unit of risk. If you would invest  13,993  in Clipper Fund Inc on September 13, 2024 and sell it today you would earn a total of  1,464  from holding Clipper Fund Inc or generate 10.46% return on investment over 90 days.

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

Clipper Fund Inc  vs.  Mairs Power Balanced

Clipper Fund

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clipper Fund Inc are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Clipper Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mairs Power Balanced

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mairs Power Balanced are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mairs Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clipper Fund and Mairs Power

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

The idea behind Clipper Fund Inc and Mairs Power Balanced 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.