Correlation Between Cliffwater Corporate and Provident Trust

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

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

Diversification Opportunities for Cliffwater Corporate and Provident Trust

0.84

Correlation Coefficient

Cliffwater Corporate  Provident Trust

Very poor diversification

The 3 months correlation between Cliffwater and Provident is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cliffwater Corporate Lending and Provident Trust Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Trust Strategy and Cliffwater Corporate 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 Cliffwater Corporate Lending are associated (or correlated) with Provident Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Trust Strategy has no effect on the direction of Cliffwater Corporate i.e., Cliffwater Corporate and Provident Trust go up and down completely randomly.

Pair Corralation between Cliffwater Corporate and Provident Trust

Assuming the 90 days horizon Cliffwater Corporate is expected to generate 1.13 times less return on investment than Provident Trust. But when comparing it to its historical volatility, Cliffwater Corporate Lending is 1.63 times less risky than Provident Trust. It trades about 0.1 of its potential returns per unit of risk. Provident Trust Strategy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,537  in Provident Trust Strategy on September 25, 2024 and sell it today you would earn a total of  446.00  from holding Provident Trust Strategy or generate 29.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Cliffwater Corporate Lending  vs.  Provident Trust Strategy

Cliffwater Corporate

Risk-Adjusted Performance

63 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Cliffwater Corporate Lending are ranked lower than 63 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cliffwater Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Provident Trust Strategy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Trust Strategy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Provident Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cliffwater Corporate and Provident Trust

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

The idea behind Cliffwater Corporate Lending and Provident Trust Strategy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.