Correlation Between Current Water and Clear Blue

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

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

Diversification Opportunities for Current Water and Clear Blue

0.35

Correlation Coefficient

Current Water  Clear Blue

Weak diversification

The 3 months correlation between Current and Clear is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Current Water Technologies and Clear Blue Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clear Blue Technologies and Current Water 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 Current Water Technologies are associated (or correlated) with Clear Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clear Blue Technologies has no effect on the direction of Current Water i.e., Current Water and Clear Blue go up and down completely randomly.

Pair Corralation between Current Water and Clear Blue

Assuming the 90 days trading horizon Current Water Technologies is expected to generate 2.44 times more return on investment than Clear Blue. However, Current Water is 2.44 times more volatile than Clear Blue Technologies. It trades about 0.17 of its potential returns per unit of risk. Clear Blue Technologies is currently generating about 0.05 per unit of risk. If you would invest  2.00  in Current Water Technologies on October 9, 2024 and sell it today you would earn a total of  1.00  from holding Current Water Technologies or generate 50.0% return on investment over 90 days.

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

Current Water Technologies  vs.  Clear Blue Technologies

Current Water Techno

Risk-Adjusted Performance

3 of 100

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.

Clear Blue Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clear Blue Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Current Water and Clear Blue

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

The idea behind Current Water Technologies and Clear Blue 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.