Correlation Between Clearwater Analytics and Model N

Can any of the company-specific risk be diversified away by investing in both Clearwater Analytics and Model N 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 Analytics and Model N into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clearwater Analytics Holdings and Model N, you can compare the effects of market volatilities on Clearwater Analytics and Model N 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 Analytics with a short position of Model N. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearwater Analytics and Model N.

Diversification Opportunities for Clearwater Analytics and Model N

-0.44

Correlation Coefficient

Clearwater Analytics  Model N

Very good diversification

The 3 months correlation between Clearwater and Model is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Clearwater Analytics Holdings and Model N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Model N and Clearwater Analytics 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 Analytics Holdings are associated (or correlated) with Model N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Model N has no effect on the direction of Clearwater Analytics i.e., Clearwater Analytics and Model N go up and down completely randomly.

Pair Corralation between Clearwater Analytics and Model N

Given the investment horizon of 90 days Clearwater Analytics Holdings is expected to under-perform the Model N. But the stock apears to be less risky and, when comparing its historical volatility, Clearwater Analytics Holdings is 1.02 times less risky than Model N. The stock trades about -0.02 of its potential returns per unit of risk. The Model N is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,474  in Model N on February 2, 2024 and sell it today you would earn a total of  500.00  from holding Model N or generate 20.21% return on investment over 90 days.

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

Clearwater Analytics Holdings  vs.  Model N

Clearwater Analytics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearwater Analytics Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Model N

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Model N are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Model N may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Clearwater Analytics and Model N

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

The idea behind Clearwater Analytics Holdings and Model N 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.

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 the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.