Correlation Between Mettler Toledo and Waters

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

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

Diversification Opportunities for Mettler Toledo and Waters

0.87

Correlation Coefficient

Mettler Toledo  Waters

Very poor diversification

The 3 months correlation between Mettler and Waters is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mettler Toledo International and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and Mettler Toledo 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 Mettler Toledo International are associated (or correlated) with Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of Mettler Toledo i.e., Mettler Toledo and Waters go up and down completely randomly.

Pair Corralation between Mettler Toledo and Waters

Considering the 90-day investment horizon Mettler Toledo International is expected to under-perform the Waters. But the stock apears to be less risky and, when comparing its historical volatility, Mettler Toledo International is 1.14 times less risky than Waters. The stock trades about -0.01 of its potential returns per unit of risk. The Waters is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  37,094  in Waters on December 29, 2024 and sell it today you would lose (35.00) from holding Waters or give up 0.09% of portfolio value over 90 days.

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

Mettler Toledo International  vs.  Waters

Mettler Toledo Inter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mettler Toledo International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Mettler Toledo is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Waters

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waters 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 Mettler Toledo and Waters

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

The idea behind Mettler Toledo International and Waters 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.