Correlation Between Waters and 207597EJ0

Can any of the company-specific risk be diversified away by investing in both Waters and 207597EJ0 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 207597EJ0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Waters and CONNECTICUT LT PWR, you can compare the effects of market volatilities on Waters and 207597EJ0 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 207597EJ0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and 207597EJ0.

Diversification Opportunities for Waters and 207597EJ0

-0.45

Correlation Coefficient

Waters  207597EJ0

Very good diversification

The 3 months correlation between Waters and 207597EJ0 is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Waters and CONNECTICUT LT PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONNECTICUT LT PWR 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 207597EJ0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONNECTICUT LT PWR has no effect on the direction of Waters i.e., Waters and 207597EJ0 go up and down completely randomly.

Pair Corralation between Waters and 207597EJ0

Considering the 90-day investment horizon Waters is expected to generate 8.81 times more return on investment than 207597EJ0. However, Waters is 8.81 times more volatile than CONNECTICUT LT PWR. It trades about 0.1 of its potential returns per unit of risk. CONNECTICUT LT PWR is currently generating about -0.18 per unit of risk. If you would invest  32,586  in Waters on September 13, 2024 and sell it today you would earn a total of  5,941  from holding Waters or generate 18.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Waters  vs.  CONNECTICUT LT PWR

Waters

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 8 (%) 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.

CONNECTICUT LT PWR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONNECTICUT LT PWR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 207597EJ0 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Waters and 207597EJ0

The main advantage of trading using opposite Waters and 207597EJ0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters position performs unexpectedly, 207597EJ0 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 207597EJ0 will offset losses from the drop in 207597EJ0's long position.

The idea behind Waters and CONNECTICUT LT PWR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.