Correlation Between Vontier Corp and Badger Meter

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

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

Diversification Opportunities for Vontier Corp and Badger Meter

0.36

Correlation Coefficient

Vontier Corp  Badger Meter

Weak diversification

The 3 months correlation between Vontier and Badger is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vontier Corp and Badger Meter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Badger Meter and Vontier Corp 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 Vontier Corp are associated (or correlated) with Badger Meter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Badger Meter has no effect on the direction of Vontier Corp i.e., Vontier Corp and Badger Meter go up and down completely randomly.

Pair Corralation between Vontier Corp and Badger Meter

Considering the 90-day investment horizon Vontier Corp is expected to generate 0.94 times more return on investment than Badger Meter. However, Vontier Corp is 1.06 times less risky than Badger Meter. It trades about 0.14 of its potential returns per unit of risk. Badger Meter is currently generating about 0.09 per unit of risk. If you would invest  3,373  in Vontier Corp on August 31, 2024 and sell it today you would earn a total of  545.00  from holding Vontier Corp or generate 16.16% return on investment over 90 days.

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

Vontier Corp  vs.  Badger Meter

Vontier Corp

Risk-Adjusted Performance

11 of 100

Good

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

Badger Meter

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Badger Meter are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady primary indicators, Badger Meter may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vontier Corp and Badger Meter

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

The idea behind Vontier Corp and Badger Meter 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.