Correlation Between Clearwater Analytics and Wesfarmers

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

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

Diversification Opportunities for Clearwater Analytics and Wesfarmers

-0.47

Correlation Coefficient

Clearwater Analytics  Wesfarmers

Very good diversification

The 3 months correlation between Clearwater and Wesfarmers is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Clearwater Analytics Holdings and Wesfarmers Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers ADR and Clearwater Analytics 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 Clearwater Analytics Holdings are associated (or correlated) with Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers ADR has no effect on the direction of Clearwater Analytics i.e., Clearwater Analytics and Wesfarmers go up and down completely randomly.

Pair Corralation between Clearwater Analytics and Wesfarmers

Given the investment horizon of 90 days Clearwater Analytics Holdings is expected to generate 1.65 times more return on investment than Wesfarmers. However, Clearwater Analytics is 1.65 times more volatile than Wesfarmers Ltd ADR. It trades about 0.17 of its potential returns per unit of risk. Wesfarmers Ltd ADR is currently generating about 0.0 per unit of risk. If you would invest  2,409  in Clearwater Analytics Holdings on August 31, 2024 and sell it today you would earn a total of  695.00  from holding Clearwater Analytics Holdings or generate 28.85% return on investment over 90 days.

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

Clearwater Analytics Holdings  vs.  Wesfarmers Ltd ADR

Clearwater Analytics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clearwater Analytics Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Clearwater Analytics displayed solid returns over the last few months and may actually be approaching a breakup point.

Wesfarmers ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wesfarmers Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Wesfarmers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clearwater Analytics and Wesfarmers

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

The idea behind Clearwater Analytics Holdings and Wesfarmers Ltd ADR 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.