Correlation Between Accord Financial and Water Ways

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

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

Diversification Opportunities for Accord Financial and Water Ways

0.65

Correlation Coefficient

Accord Financial  Water Ways

Poor diversification

The 3 months correlation between Accord and Water is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Accord Financial Corp and Water Ways Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Water Ways Technologies and Accord Financial 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 Accord Financial Corp are associated (or correlated) with Water Ways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Water Ways Technologies has no effect on the direction of Accord Financial i.e., Accord Financial and Water Ways go up and down completely randomly.

Pair Corralation between Accord Financial and Water Ways

Assuming the 90 days trading horizon Accord Financial Corp is expected to under-perform the Water Ways. But the stock apears to be less risky and, when comparing its historical volatility, Accord Financial Corp is 26.71 times less risky than Water Ways. The stock trades about -0.1 of its potential returns per unit of risk. The Water Ways Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Water Ways Technologies on October 1, 2024 and sell it today you would lose (9.50) from holding Water Ways Technologies or give up 95.0% of portfolio value over 90 days.

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

Accord Financial Corp  vs.  Water Ways Technologies

Accord Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Water Ways Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Water Ways Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Water Ways showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Accord Financial and Water Ways

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

The idea behind Accord Financial Corp and Water Ways Technologies 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.