Correlation Between Clarkson PLC and Seven West

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

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

Diversification Opportunities for Clarkson PLC and Seven West

0.72

Correlation Coefficient

Clarkson PLC  Seven West

Poor diversification

The 3 months correlation between Clarkson and Seven is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Clarkson PLC and Seven West Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven West Media and Clarkson PLC 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 Clarkson PLC are associated (or correlated) with Seven West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven West Media has no effect on the direction of Clarkson PLC i.e., Clarkson PLC and Seven West go up and down completely randomly.

Pair Corralation between Clarkson PLC and Seven West

Assuming the 90 days horizon Clarkson PLC is expected to under-perform the Seven West. But the stock apears to be less risky and, when comparing its historical volatility, Clarkson PLC is 1.27 times less risky than Seven West. The stock trades about -0.03 of its potential returns per unit of risk. The Seven West Media is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8.05  in Seven West Media on December 29, 2024 and sell it today you would earn a total of  0.05  from holding Seven West Media or generate 0.62% return on investment over 90 days.

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

Clarkson PLC  vs.  Seven West Media

Clarkson PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clarkson PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Seven West Media

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seven West Media are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Seven West is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Clarkson PLC and Seven West

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

The idea behind Clarkson PLC and Seven West Media 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.