Correlation Between Natera and Waters

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

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

Diversification Opportunities for Natera and Waters

0.65

Correlation Coefficient

Natera  Waters

Poor diversification

The 3 months correlation between Natera and Waters is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Natera Inc and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and Natera 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 Natera Inc 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 Natera i.e., Natera and Waters go up and down completely randomly.

Pair Corralation between Natera and Waters

Given the investment horizon of 90 days Natera Inc is expected to generate 1.16 times more return on investment than Waters. However, Natera is 1.16 times more volatile than Waters. It trades about 0.14 of its potential returns per unit of risk. Waters is currently generating about 0.06 per unit of risk. If you would invest  12,354  in Natera Inc on September 21, 2024 and sell it today you would earn a total of  3,838  from holding Natera Inc or generate 31.07% return on investment over 90 days.

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

Natera Inc  vs.  Waters

Natera Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Natera and Waters

The main advantage of trading using opposite Natera and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natera 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 Natera Inc 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.