Correlation Between Water Ways and Clarke

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

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

Diversification Opportunities for Water Ways and Clarke

0.66

Correlation Coefficient

Water Ways  Clarke

Poor diversification

The 3 months correlation between Water and Clarke is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Water Ways Technologies and Clarke Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarke Inc and Water Ways 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 Water Ways Technologies are associated (or correlated) with Clarke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarke Inc has no effect on the direction of Water Ways i.e., Water Ways and Clarke go up and down completely randomly.

Pair Corralation between Water Ways and Clarke

Assuming the 90 days horizon Water Ways Technologies is expected to generate 146.96 times more return on investment than Clarke. However, Water Ways is 146.96 times more volatile than Clarke Inc. It trades about 0.11 of its potential returns per unit of risk. Clarke Inc is currently generating about -0.06 per unit of risk. If you would invest  1.50  in Water Ways Technologies on September 22, 2024 and sell it today you would lose (1.00) from holding Water Ways Technologies or give up 66.67% of portfolio value over 90 days.

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

Water Ways Technologies  vs.  Clarke Inc

Water Ways Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Water Ways Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Water Ways showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Water Ways and Clarke

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

The idea behind Water Ways Technologies and Clarke Inc 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.