Correlation Between Current Water and NTG Clarity

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

Diversification Opportunities for Current Water and NTG Clarity

-0.37

Correlation Coefficient

Current Water  NTG Clarity

Very good diversification

The 3 months correlation between Current and NTG is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Current Water Technologies and NTG Clarity Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTG Clarity Networks 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 NTG Clarity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTG Clarity Networks has no effect on the direction of Current Water i.e., Current Water and NTG Clarity go up and down completely randomly.

Pair Corralation between Current Water and NTG Clarity

Assuming the 90 days trading horizon Current Water is expected to generate 1.12 times less return on investment than NTG Clarity. In addition to that, Current Water is 1.45 times more volatile than NTG Clarity Networks. It trades about 0.06 of its total potential returns per unit of risk. NTG Clarity Networks is currently generating about 0.1 per unit of volatility. If you would invest  15.00  in NTG Clarity Networks on September 26, 2024 and sell it today you would earn a total of  142.00  from holding NTG Clarity Networks or generate 946.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Current Water Technologies  vs.  NTG Clarity Networks

Current Water Techno

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Current Water Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Current Water showed solid returns over the last few months and may actually be approaching a breakup point.

NTG Clarity Networks

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NTG Clarity Networks are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NTG Clarity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Current Water and NTG Clarity

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

The idea behind Current Water Technologies and NTG Clarity Networks 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.