Correlation Between Clearwater Analytics and Alight

Can any of the company-specific risk be diversified away by investing in both Clearwater Analytics and Alight 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 Alight 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 Alight Inc, you can compare the effects of market volatilities on Clearwater Analytics and Alight 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 Alight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearwater Analytics and Alight.

Diversification Opportunities for Clearwater Analytics and Alight

0.73

Correlation Coefficient

Clearwater Analytics  Alight

Poor diversification

The 3 months correlation between Clearwater and Alight is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Clearwater Analytics Holdings and Alight Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alight Inc 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 Alight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alight Inc has no effect on the direction of Clearwater Analytics i.e., Clearwater Analytics and Alight go up and down completely randomly.

Pair Corralation between Clearwater Analytics and Alight

Given the investment horizon of 90 days Clearwater Analytics Holdings is expected to generate 0.97 times more return on investment than Alight. However, Clearwater Analytics Holdings is 1.03 times less risky than Alight. It trades about 0.0 of its potential returns per unit of risk. Alight Inc is currently generating about -0.35 per unit of risk. If you would invest  3,025  in Clearwater Analytics Holdings on September 14, 2024 and sell it today you would lose (15.00) from holding Clearwater Analytics Holdings or give up 0.5% of portfolio value over 90 days.

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

Clearwater Analytics Holdings  vs.  Alight Inc

Clearwater Analytics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clearwater Analytics Holdings are ranked lower than 10 (%) 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.

Alight Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Alight Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Alight is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Clearwater Analytics and Alight

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

The idea behind Clearwater Analytics Holdings and Alight 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.