Correlation Between Roper Industries and Clearwater Paper

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

Diversification Opportunities for Roper Industries and Clearwater Paper

0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between Roper and Clearwater is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Roper Industries 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 Roper Industries 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 Roper Industries 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 Roper Industries i.e., Roper Industries and Clearwater Paper go up and down completely randomly.

Pair Corralation between Roper Industries and Clearwater Paper

Considering the 90-day investment horizon Roper Industries is expected to generate 32.46 times less return on investment than Clearwater Paper. But when comparing it to its historical volatility, Roper Industries is 2.02 times less risky than Clearwater Paper. It trades about 0.0 of its potential returns per unit of risk. Clearwater Paper Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,883  in Clearwater Paper Corp on August 28, 2022 and sell it today you would earn a total of  1,064  from holding Clearwater Paper Corp or generate 36.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Roper Industries  vs.  Clearwater Paper Corp

 Performance (%) 
       Timeline  
Roper Industries 
Roper Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Roper Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Roper Industries may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Roper 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

Roper Industries and Clearwater Paper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Roper Industries and Clearwater Paper

The main advantage of trading using opposite Roper Industries and Clearwater Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roper Industries 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 Roper Industries 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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