Correlation Between Powerschool Holdings and Clearwater Analytics

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

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

Diversification Opportunities for Powerschool Holdings and Clearwater Analytics

0.81

Correlation Coefficient

Powerschool Holdings  Clearwater Analytics

Very poor diversification

The 3 months correlation between Powerschool and Clearwater is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Powerschool Holdings and Clearwater Analytics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Analytics and Powerschool Holdings 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 Powerschool Holdings 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 Powerschool Holdings i.e., Powerschool Holdings and Clearwater Analytics go up and down completely randomly.

Pair Corralation between Powerschool Holdings and Clearwater Analytics

Given the investment horizon of 90 days Powerschool Holdings is expected to generate 10.16 times less return on investment than Clearwater Analytics. But when comparing it to its historical volatility, Powerschool Holdings is 27.67 times less risky than Clearwater Analytics. It trades about 0.17 of its potential returns per unit of risk. Clearwater Analytics Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,566  in Clearwater Analytics Holdings on September 21, 2024 and sell it today you would earn a total of  226.00  from holding Clearwater Analytics Holdings or generate 8.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	12.7%
Values	Daily Returns

Powerschool Holdings  vs.  Clearwater Analytics Holdings

Powerschool Holdings

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Powerschool Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Powerschool Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Clearwater Analytics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clearwater Analytics Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Clearwater Analytics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Powerschool Holdings and Clearwater Analytics

The main advantage of trading using opposite Powerschool Holdings and Clearwater Analytics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Powerschool Holdings 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 Powerschool Holdings 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.

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.