Correlation Between Clarus Corp and Drive Shack

Can any of the company-specific risk be diversified away by investing in both Clarus Corp and Drive Shack 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 Clarus Corp and Drive Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Clarus Corp and Drive Shack

-0.28

Correlation Coefficient

Clarus Corp  Drive Shack

Very good diversification

The 3 months correlation between Clarus and Drive is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Clarus Corp and Drive Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drive Shack and Clarus Corp 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 Clarus Corp are associated (or correlated) with Drive Shack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drive Shack has no effect on the direction of Clarus Corp i.e., Clarus Corp and Drive Shack go up and down completely randomly.

Pair Corralation between Clarus Corp and Drive Shack

Given the investment horizon of 90 days Clarus Corp is expected to generate 0.48 times more return on investment than Drive Shack. However, Clarus Corp is 2.1 times less risky than Drive Shack. It trades about -0.04 of its potential returns per unit of risk. Drive Shack is currently generating about -0.05 per unit of risk. If you would invest  2,247  in Clarus Corp on February 6, 2024 and sell it today you would lose (1,516) from holding Clarus Corp or give up 67.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.17%
Values	Daily Returns

Clarus Corp  vs.  Drive Shack

Clarus Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clarus Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Clarus Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Drive Shack

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Drive Shack has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Drive Shack is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Clarus Corp and Drive Shack

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

The idea behind Clarus Corp and Drive Shack 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.