Correlation Between CSW Industrials and Watts Water

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

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

Diversification Opportunities for CSW Industrials and Watts Water

-0.46

Correlation Coefficient

CSW Industrials  Watts Water

Very good diversification

The 3 months correlation between CSW and Watts is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding CSW Industrials and Watts Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watts Water Technologies and CSW Industrials 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 CSW Industrials are associated (or correlated) with Watts Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watts Water Technologies has no effect on the direction of CSW Industrials i.e., CSW Industrials and Watts Water go up and down completely randomly.

Pair Corralation between CSW Industrials and Watts Water

Given the investment horizon of 90 days CSW Industrials is expected to under-perform the Watts Water. In addition to that, CSW Industrials is 1.08 times more volatile than Watts Water Technologies. It trades about -0.15 of its total potential returns per unit of risk. Watts Water Technologies is currently generating about 0.05 per unit of volatility. If you would invest  20,331  in Watts Water Technologies on December 27, 2024 and sell it today you would earn a total of  809.00  from holding Watts Water Technologies or generate 3.98% return on investment over 90 days.

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

CSW Industrials  vs.  Watts Water Technologies

CSW Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSW Industrials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Watts Water Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Watts Water Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Watts Water is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CSW Industrials and Watts Water

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

The idea behind CSW Industrials and Watts Water Technologies 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.