Correlation Between Cleartronic and Shotspotter

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

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

Diversification Opportunities for Cleartronic and Shotspotter

0.58

Correlation Coefficient

Cleartronic  Shotspotter

Very weak diversification

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

Pair Corralation between Cleartronic and Shotspotter

Given the investment horizon of 90 days Cleartronic is expected to generate 9.34 times more return on investment than Shotspotter. However, Cleartronic is 9.34 times more volatile than Shotspotter. It trades about 0.07 of its potential returns per unit of risk. Shotspotter is currently generating about -0.03 per unit of risk. If you would invest  3.00  in Cleartronic on October 10, 2024 and sell it today you would lose (1.73) from holding Cleartronic or give up 57.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Cleartronic  vs.  Shotspotter

Cleartronic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cleartronic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Cleartronic demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Shotspotter

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shotspotter are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Shotspotter demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cleartronic and Shotspotter

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

The idea behind Cleartronic and Shotspotter 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.