Correlation Between Parts ID and Clearwater Paper

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

Diversification Opportunities for Parts ID and Clearwater Paper

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Parts and Clearwater is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Parts ID 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 Parts ID 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 Parts ID 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 Parts ID i.e., Parts ID and Clearwater Paper go up and down completely randomly.

Pair Corralation between Parts ID and Clearwater Paper

Allowing for the 90-day total investment horizon Parts ID is expected to under-perform the Clearwater Paper. In addition to that, Parts ID is 2.22 times more volatile than Clearwater Paper Corp. It trades about -0.02 of its total potential returns per unit of risk. Clearwater Paper Corp is currently generating about 0.02 per unit of volatility. If you would invest  3,636  in Clearwater Paper Corp on August 30, 2022 and sell it today you would earn a total of  126.00  from holding Clearwater Paper Corp or generate 3.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Parts ID  vs.  Clearwater Paper Corp

 Performance (%) 
       Timeline  
Parts ID 
Parts Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Parts ID are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Parts ID may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Parts 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 unsteady 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

Parts ID and Clearwater Paper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Parts ID and Clearwater Paper

The main advantage of trading using opposite Parts ID and Clearwater Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parts ID 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 Parts ID 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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