Correlation Between Waters and UroGen Pharma

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

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

Diversification Opportunities for Waters and UroGen Pharma

-0.42

Correlation Coefficient

Waters  UroGen Pharma

Very good diversification

The 3 months correlation between Waters and UroGen is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Waters and UroGen Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UroGen Pharma and Waters 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 Waters are associated (or correlated) with UroGen Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UroGen Pharma has no effect on the direction of Waters i.e., Waters and UroGen Pharma go up and down completely randomly.

Pair Corralation between Waters and UroGen Pharma

Considering the 90-day investment horizon Waters is expected to under-perform the UroGen Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Waters is 1.35 times less risky than UroGen Pharma. The stock trades about -0.01 of its potential returns per unit of risk. The UroGen Pharma is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,220  in UroGen Pharma on September 2, 2024 and sell it today you would earn a total of  50.00  from holding UroGen Pharma or generate 4.1% return on investment over 90 days.

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

Waters  vs.  UroGen Pharma

Waters

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Waters unveiled solid returns over the last few months and may actually be approaching a breakup point.

UroGen Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UroGen Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, UroGen Pharma is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Waters and UroGen Pharma

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

The idea behind Waters and UroGen Pharma 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.