Correlation Between EXACT Sciences and Waters

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

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

Diversification Opportunities for EXACT Sciences and Waters

-0.52

Correlation Coefficient

EXACT Sciences  Waters

Excellent diversification

The 3 months correlation between EXACT and Waters is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding EXACT Sciences and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and EXACT Sciences 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 EXACT Sciences are associated (or correlated) with Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of EXACT Sciences i.e., EXACT Sciences and Waters go up and down completely randomly.

Pair Corralation between EXACT Sciences and Waters

Given the investment horizon of 90 days EXACT Sciences is expected to under-perform the Waters. In addition to that, EXACT Sciences is 1.33 times more volatile than Waters. It trades about -0.04 of its total potential returns per unit of risk. Waters is currently generating about 0.06 per unit of volatility. If you would invest  33,971  in Waters on September 21, 2024 and sell it today you would earn a total of  2,845  from holding Waters or generate 8.37% return on investment over 90 days.

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

EXACT Sciences  vs.  Waters

EXACT Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXACT Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Waters

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Waters may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EXACT Sciences and Waters

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

The idea behind EXACT Sciences and Waters 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.