Correlation Between Alpha and Clearfield

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

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

Diversification Opportunities for Alpha and Clearfield

0.9

Correlation Coefficient

Alpha  Clearfield

Almost no diversification

The 3 months correlation between Alpha and Clearfield is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and Clearfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearfield and Alpha 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 Alpha and Omega are associated (or correlated) with Clearfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearfield has no effect on the direction of Alpha i.e., Alpha and Clearfield go up and down completely randomly.

Pair Corralation between Alpha and Clearfield

Given the investment horizon of 90 days Alpha is expected to generate 1.24 times less return on investment than Clearfield. In addition to that, Alpha is 1.46 times more volatile than Clearfield. It trades about 0.15 of its total potential returns per unit of risk. Clearfield is currently generating about 0.27 per unit of volatility. If you would invest  3,112  in Clearfield on May 2, 2025 and sell it today you would earn a total of  1,260  from holding Clearfield or generate 40.49% return on investment over 90 days.

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

Alpha and Omega  vs.  Clearfield

Alpha and Omega

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha and Omega are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

Clearfield

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clearfield are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Clearfield exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha and Clearfield

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

The idea behind Alpha and Omega and Clearfield 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.