Correlation Between Current Water and DIRTT Environmental

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

Diversification Opportunities for Current Water and DIRTT Environmental

-0.26

Correlation Coefficient

Current Water  DIRTT Environmental

Very good diversification

The 3 months correlation between Current and DIRTT is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Current Water Technologies and DIRTT Environmental Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIRTT Environmental 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 DIRTT Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIRTT Environmental has no effect on the direction of Current Water i.e., Current Water and DIRTT Environmental go up and down completely randomly.

Pair Corralation between Current Water and DIRTT Environmental

Assuming the 90 days trading horizon Current Water is expected to generate 1.84 times less return on investment than DIRTT Environmental. In addition to that, Current Water is 2.86 times more volatile than DIRTT Environmental Solutions. It trades about 0.02 of its total potential returns per unit of risk. DIRTT Environmental Solutions is currently generating about 0.1 per unit of volatility. If you would invest  71.00  in DIRTT Environmental Solutions on September 12, 2024 and sell it today you would earn a total of  19.00  from holding DIRTT Environmental Solutions or generate 26.76% return on investment over 90 days.

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

Current Water Technologies  vs.  DIRTT Environmental Solutions

Current Water Techno

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Current Water Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Current Water showed solid returns over the last few months and may actually be approaching a breakup point.

DIRTT Environmental

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIRTT Environmental Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, DIRTT Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Current Water and DIRTT Environmental

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

The idea behind Current Water Technologies and DIRTT Environmental Solutions 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.