Correlation Between Caldwell Partners and Current Water

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

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

Diversification Opportunities for Caldwell Partners and Current Water

0.39

Correlation Coefficient

Caldwell Partners  Current Water

Weak diversification

The 3 months correlation between Caldwell and Current is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Caldwell Partners Internationa and Current Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Current Water Techno and Caldwell Partners 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 Caldwell Partners International are associated (or correlated) with Current Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Current Water Techno has no effect on the direction of Caldwell Partners i.e., Caldwell Partners and Current Water go up and down completely randomly.

Pair Corralation between Caldwell Partners and Current Water

Assuming the 90 days trading horizon Caldwell Partners International is expected to under-perform the Current Water. But the stock apears to be less risky and, when comparing its historical volatility, Caldwell Partners International is 2.94 times less risky than Current Water. The stock trades about -0.09 of its potential returns per unit of risk. The Current Water Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Current Water Technologies on December 30, 2024 and sell it today you would lose (0.50) from holding Current Water Technologies or give up 16.67% of portfolio value over 90 days.

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

Caldwell Partners Internationa  vs.  Current Water Technologies

Caldwell Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caldwell Partners International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Current Water Techno

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Current Water Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Current Water showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caldwell Partners and Current Water

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

The idea behind Caldwell Partners International and Current Water Technologies 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.