Correlation Between Badger Meter and Trimble

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

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

Diversification Opportunities for Badger Meter and Trimble

0.51

Correlation Coefficient

Badger Meter  Trimble

Very weak diversification

The 3 months correlation between Badger and Trimble is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Badger Meter and Trimble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trimble and Badger Meter 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 Badger Meter are associated (or correlated) with Trimble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trimble has no effect on the direction of Badger Meter i.e., Badger Meter and Trimble go up and down completely randomly.

Pair Corralation between Badger Meter and Trimble

Considering the 90-day investment horizon Badger Meter is expected to generate 0.97 times more return on investment than Trimble. However, Badger Meter is 1.03 times less risky than Trimble. It trades about 0.09 of its potential returns per unit of risk. Trimble is currently generating about 0.04 per unit of risk. If you would invest  10,758  in Badger Meter on September 20, 2024 and sell it today you would earn a total of  11,960  from holding Badger Meter or generate 111.17% return on investment over 90 days.

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

Badger Meter  vs.  Trimble

Badger Meter

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Badger Meter are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Badger Meter is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Trimble

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Badger Meter and Trimble

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

The idea behind Badger Meter and Trimble 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.