Correlation Between Clearwater Paper and Farfetch

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Can any of the company-specific risk be diversified away by investing in both Clearwater Paper and Farfetch 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 Clearwater Paper and Farfetch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clearwater Paper and Farfetch Ltd Class, you can compare the effects of market volatilities on Clearwater Paper and Farfetch 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 Clearwater Paper with a short position of Farfetch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearwater Paper and Farfetch.

Diversification Opportunities for Clearwater Paper and Farfetch

0.26
  Correlation Coefficient

Modest diversification

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

Pair Corralation between Clearwater Paper and Farfetch

Considering the 90-day investment horizon Clearwater Paper is expected to generate 0.47 times more return on investment than Farfetch. However, Clearwater Paper is 2.12 times less risky than Farfetch. It trades about 0.02 of its potential returns per unit of risk. Farfetch Ltd Class is currently generating about -0.06 per unit of risk. If you would invest  3,460  in Clearwater Paper on September 10, 2022 and sell it today you would earn a total of  487.00  from holding Clearwater Paper or generate 14.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Clearwater Paper  vs.  Farfetch Ltd Class

 Performance (%) 
       Timeline  
Clearwater Paper 
Clearwater Performance
0 of 100
Over the last 90 days Clearwater Paper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Clearwater Paper is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Clearwater Price Channel

Farfetch Class 
Farfetch Performance
0 of 100
Over the last 90 days Farfetch Ltd Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Farfetch Price Channel

Clearwater Paper and Farfetch Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Clearwater Paper and Farfetch

The main advantage of trading using opposite Clearwater Paper and Farfetch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearwater Paper position performs unexpectedly, Farfetch 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 Farfetch will offset losses from the drop in Farfetch's long position.
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The idea behind Clearwater Paper and Farfetch Ltd Class 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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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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