Correlation Between Clarke and Bombardier

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

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

Diversification Opportunities for Clarke and Bombardier

0.33

Correlation Coefficient

Clarke  Bombardier

Weak diversification

The 3 months correlation between Clarke and Bombardier is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Clarke Inc and Bombardier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombardier and Clarke 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 Clarke Inc are associated (or correlated) with Bombardier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombardier has no effect on the direction of Clarke i.e., Clarke and Bombardier go up and down completely randomly.

Pair Corralation between Clarke and Bombardier

Assuming the 90 days trading horizon Clarke Inc is expected to generate 0.1 times more return on investment than Bombardier. However, Clarke Inc is 10.34 times less risky than Bombardier. It trades about -0.06 of its potential returns per unit of risk. Bombardier is currently generating about -0.01 per unit of risk. If you would invest  2,385  in Clarke Inc on September 21, 2024 and sell it today you would lose (25.00) from holding Clarke Inc or give up 1.05% of portfolio value over 90 days.

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

Clarke Inc  vs.  Bombardier

Clarke Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clarke Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Clarke is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Bombardier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bombardier has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bombardier is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Clarke and Bombardier

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

The idea behind Clarke Inc and Bombardier 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.