Correlation Between Current Water and POET Technologies

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

Diversification Opportunities for Current Water and POET Technologies

0.2

Correlation Coefficient

Current Water  POET Technologies

Modest diversification

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

Pair Corralation between Current Water and POET Technologies

Assuming the 90 days trading horizon Current Water Technologies is expected to generate 1.45 times more return on investment than POET Technologies. However, Current Water is 1.45 times more volatile than POET Technologies. It trades about 0.01 of its potential returns per unit of risk. POET Technologies is currently generating about 0.0 per unit of risk. If you would invest  3.00  in Current Water Technologies on December 21, 2024 and sell it today you would lose (0.50) from holding Current Water Technologies or give up 16.67% of portfolio value over 90 days.

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

Current Water Technologies  vs.  POET Technologies

Current Water Techno

Risk-Adjusted Performance

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 weak basic indicators, Current Water may actually be approaching a critical reversion point that can send shares even higher in April 2025.

POET Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days POET Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, POET Technologies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Current Water and POET Technologies

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

The idea behind Current Water Technologies and POET 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.