Correlation Between Open Text and Clearwater Analytics

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

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

Diversification Opportunities for Open Text and Clearwater Analytics

0.61

Correlation Coefficient

Open Text  Clearwater Analytics

Poor diversification

The 3 months correlation between Open and Clearwater is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Open Text Corp and Clearwater Analytics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Analytics and Open Text 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 Open Text Corp are associated (or correlated) with Clearwater Analytics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearwater Analytics has no effect on the direction of Open Text i.e., Open Text and Clearwater Analytics go up and down completely randomly.

Pair Corralation between Open Text and Clearwater Analytics

Given the investment horizon of 90 days Open Text Corp is expected to under-perform the Clearwater Analytics. In addition to that, Open Text is 1.43 times more volatile than Clearwater Analytics Holdings. It trades about -0.27 of its total potential returns per unit of risk. Clearwater Analytics Holdings is currently generating about 0.07 per unit of volatility. If you would invest  1,712  in Clearwater Analytics Holdings on February 4, 2024 and sell it today you would earn a total of  55.00  from holding Clearwater Analytics Holdings or generate 3.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Open Text Corp  vs.  Clearwater Analytics Holdings

Open Text Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Open Text Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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 very healthy basic indicators, Clearwater Analytics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Open Text and Clearwater Analytics

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

The idea behind Open Text Corp and Clearwater Analytics Holdings 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..