Correlation Between DHI and Clearwater Analytics

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Can any of the company-specific risk be diversified away by investing in both DHI and Clearwater Analytics 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 DHI and Clearwater Analytics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DHI Group and Clearwater Analytics Holdings, you can compare the effects of market volatilities on DHI and Clearwater Analytics 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 DHI with a short position of Clearwater Analytics. Check out your portfolio center. Please also check ongoing floating volatility patterns of DHI and Clearwater Analytics.

Diversification Opportunities for DHI and Clearwater Analytics

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between DHI and Clearwater is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding DHI Group and Clearwater Analytics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Analytics and DHI 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 DHI Group are associated (or correlated) with Clearwater Analytics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearwater Analytics has no effect on the direction of DHI i.e., DHI and Clearwater Analytics go up and down completely randomly.

Pair Corralation between DHI and Clearwater Analytics

Considering the 90-day investment horizon DHI is expected to generate 3.62 times less return on investment than Clearwater Analytics. In addition to that, DHI is 1.23 times more volatile than Clearwater Analytics Holdings. It trades about 0.04 of its total potential returns per unit of risk. Clearwater Analytics Holdings is currently generating about 0.17 per unit of volatility. If you would invest  2,409  in Clearwater Analytics Holdings on September 3, 2024 and sell it today you would earn a total of  695.00  from holding Clearwater Analytics Holdings or generate 28.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

DHI Group  vs.  Clearwater Analytics Holdings

 Performance 
       Timeline  
DHI Group 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in DHI Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, DHI may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Clearwater Analytics 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Clearwater Analytics Holdings are ranked lower than 13 (%) 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.

DHI and Clearwater Analytics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DHI and Clearwater Analytics

The main advantage of trading using opposite DHI and Clearwater Analytics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DHI position performs unexpectedly, Clearwater Analytics 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 Clearwater Analytics will offset losses from the drop in Clearwater Analytics' long position.
The idea behind DHI Group and Clearwater Analytics Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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