Correlation Between Clearfield and Harmonic

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

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

Diversification Opportunities for Clearfield and Harmonic

0.58

Correlation Coefficient

Clearfield  Harmonic

Very weak diversification

The 3 months correlation between Clearfield and Harmonic is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Clearfield and Harmonic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmonic and Clearfield 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 Clearfield are associated (or correlated) with Harmonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmonic has no effect on the direction of Clearfield i.e., Clearfield and Harmonic go up and down completely randomly.

Pair Corralation between Clearfield and Harmonic

Given the investment horizon of 90 days Clearfield is expected to under-perform the Harmonic. But the stock apears to be less risky and, when comparing its historical volatility, Clearfield is 1.43 times less risky than Harmonic. The stock trades about -0.1 of its potential returns per unit of risk. The Harmonic is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,416  in Harmonic on August 31, 2024 and sell it today you would lose (160.00) from holding Harmonic or give up 11.3% of portfolio value over 90 days.

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

Clearfield  vs.  Harmonic

Clearfield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Harmonic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmonic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Clearfield and Harmonic

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

The idea behind Clearfield and Harmonic 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.