Correlation Between Alphabet and Clearwater Paper

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

Diversification Opportunities for Alphabet and Clearwater Paper

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alphabet and Clearwater is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Cl A and Clearwater Paper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Paper Corp and Alphabet 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 Alphabet Cl A are associated (or correlated) with Clearwater Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearwater Paper Corp has no effect on the direction of Alphabet i.e., Alphabet and Clearwater Paper go up and down completely randomly.

Pair Corralation between Alphabet and Clearwater Paper

Assuming the 90 days horizon Alphabet is expected to generate 1.25 times less return on investment than Clearwater Paper. But when comparing it to its historical volatility, Alphabet Cl A is 1.46 times less risky than Clearwater Paper. It trades about 0.02 of its potential returns per unit of risk. Clearwater Paper Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,720  in Clearwater Paper Corp on August 31, 2022 and sell it today you would earn a total of  42.00  from holding Clearwater Paper Corp or generate 1.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alphabet Cl A  vs.  Clearwater Paper Corp

 Performance (%) 
       Timeline  
Alphabet Cl A 
Alphabet Performance
0 of 100
Over the last 90 days Alphabet Cl A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's technical and fundamental indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Alphabet Price Channel

Clearwater Paper Corp 
Clearwater Performance
0 of 100
Over the last 90 days Clearwater Paper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Clearwater Price Channel

Alphabet and Clearwater Paper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alphabet and Clearwater Paper

The main advantage of trading using opposite Alphabet and Clearwater Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Clearwater Paper 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 Clearwater Paper will offset losses from the drop in Clearwater Paper's long position.
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The idea behind Alphabet Cl A and Clearwater Paper Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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