Correlation Between Badger Meter and Mesa Laboratories

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

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

Diversification Opportunities for Badger Meter and Mesa Laboratories

-0.01

Correlation Coefficient

Badger Meter  Mesa Laboratories

Good diversification

The 3 months correlation between Badger and Mesa is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Badger Meter and Mesa Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Laboratories and Badger Meter 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 Badger Meter are associated (or correlated) with Mesa Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesa Laboratories has no effect on the direction of Badger Meter i.e., Badger Meter and Mesa Laboratories go up and down completely randomly.

Pair Corralation between Badger Meter and Mesa Laboratories

Considering the 90-day investment horizon Badger Meter is expected to generate 0.55 times more return on investment than Mesa Laboratories. However, Badger Meter is 1.82 times less risky than Mesa Laboratories. It trades about 0.05 of its potential returns per unit of risk. Mesa Laboratories is currently generating about -0.04 per unit of risk. If you would invest  20,662  in Badger Meter on August 30, 2024 and sell it today you would earn a total of  938.00  from holding Badger Meter or generate 4.54% return on investment over 90 days.

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

Badger Meter  vs.  Mesa Laboratories

Badger Meter

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Badger Meter are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Badger Meter is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Mesa Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mesa Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Badger Meter and Mesa Laboratories

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

The idea behind Badger Meter and Mesa Laboratories 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.