Correlation Between CVD Equipment and Watts Water

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

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

Diversification Opportunities for CVD Equipment and Watts Water

-0.45

Correlation Coefficient

CVD Equipment  Watts Water

Very good diversification

The 3 months correlation between CVD and Watts is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding CVD Equipment 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 CVD Equipment 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 CVD Equipment 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 CVD Equipment i.e., CVD Equipment and Watts Water go up and down completely randomly.

Pair Corralation between CVD Equipment and Watts Water

Considering the 90-day investment horizon CVD Equipment is expected to under-perform the Watts Water. In addition to that, CVD Equipment is 2.31 times more volatile than Watts Water Technologies. It trades about -0.05 of its total potential returns per unit of risk. Watts Water Technologies is currently generating about 0.13 per unit of volatility. If you would invest  19,305  in Watts Water Technologies on September 1, 2024 and sell it today you would earn a total of  2,274  from holding Watts Water Technologies or generate 11.78% return on investment over 90 days.

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

CVD Equipment  vs.  Watts Water Technologies

CVD Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVD Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Watts Water Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Watts Water Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Watts Water may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CVD Equipment and Watts Water

The main advantage of trading using opposite CVD Equipment and Watts Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVD Equipment 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 CVD Equipment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.